From Mr Denis Richard.

Sir, Jeffrey Sachs' Personal View "Power unto itself" (December 11) on the need to reassess the role of the International Monetary Fund goes beyond the seasonal Rocky bash - Sachs versus the IMF - because it raises three important dimensions of governance for multilateral institutions: accountability, information and transparency.

At its simplest, accountability means holding public officials responsible for their actions. Economic objectives of public accountability include congruence between public policy and actual information, and the efficient allocation and use of resources. This not only requires systems of financial accountability, but also the capacity and willingness to monitor and evaluate the overall economic performance of the IMF.

Adequate and reliable information is a precondition for accountability, and refers to the availability of and access to information from public and private sources, and transparency of decision-making processes.

The IMF's executive board, representing the Governors of member countries, is deprived of an independent evaluation of the work of the staff. By comparison, the World Bank executive board can draw on the output of the operations evaluation department that answers directly questions from the board. Occasional evaluations of IMF operations have been carried out in the past but always by the staff itself.

By definition, this casts doubts on the validity of such work as it invariably concludes that, with the exception of a few misplaced commas and sentences, all is fine in the IMF universe. An example of this is the evaluation of the Mexican crisis. It was conducted by a retired senior staff member, produced some recommendations of strengthening of surveillance, the utility of which can now be assessed in the light of the Asian crises, and shifted the blame on to another retired senior staff member!

The IMF created in mid-1996 an embryo of evaluation department, but unfortunately it responds directly to management and not to the IMF board and none of its findings has so far been made available to the board or the public. An independent evaluation capability is a necessary step. But it would not be sufficient to ensure better governance for the IMF as the process of feeding back the lessons learnt is another treacherous task for the board.

Strengthening the governance of the IMF (accountability, information and transparency) is long overdue, as Mr Sachs has clearly pointed out using the Korean case. The shareholders and the board of the IMF should give themselves the means to assess the work of an international organisation with so much power.

Denis Richard, chief economist and partner, IZI metodi, analisi e valutazione economiche, Via Cornelio Celso, 11, 00161 Rome, Italy

From Professor Jeffrey D. Sachs.

Sir, I welcome the invitation of Shailendra Anjaria, the IMF external director, to readers to examine the IMF web site to see what the IMF has actually said and known about the Asian financial crisis (Letters, December 17). The rest of Mr Anjaria's letter, however, is disingenuous. The fund gave no hint of worry about an east Asian financial crisis until the outbreak of the crisis itself. As recently as the IMF's World Economic Outlook of October 1997, the IMF forecasts Korean growth in 1998 at 6 per cent (Table A2, p.148). Who is kidding whom about early warnings?

The simple fact is that neither the fund, nor most others, had even an inkling of the maelstrom that was about to hit, and that is the main reason that Asia has been hit by a financial panic that vastly exaggerates the fundamental ills of the Asian economies.

The IMF has not stopped the panic, and arguably has added to it, both by its rhetoric (which underplays the role of panic and overplays the weaknesses in Asia) and by its draconian macroeconomic policy conditions. Since the time the IMF has signed each Asian bailout programme, the respective Asian currencies have continued to plummet.

I am delighted to read from Mr Anjaria's letter that the Korea letter of intent has been made public in the past few days. This is apparently still not the case with Indonesia, Thailand and the Philippines. It remains IMF policy to keep these crucial documents secret unless the borrowing country chooses to make them public (a relatively rare event).

Dozens and dozens of programmes still operate under a veil of secrecy. Moreover, the IMF has never declassified these documents, even after decades. The secrecy of the documents, and much important surrounding materials, makes it impossible to sustain broad public and professional scrutiny of IMF operations. IMF press releases don't suffice. In short, the IMF gets away with serious mistakes of judgment that never come to light. In the IMF's public pronouncements, any programme shortcoming is inevitably the fault of the borrowing country.

It will be interesting and important to see if the IMF can change its ways. I am placing a standing order with Mr Anjaria's office for all published IMF letters of intent, and for supporting documents. Moreover, I am requesting all letters of intent that have been made public in the past five years (alas, very few, but let us see!).

I hope that other interested observers will also push the IMF for public disclosure of relevant documents. It is long past time to shed light on the actions of this sometimes very valuable, but occasionally harmful, institution that acts in the name of the global public.

Jeffrey D. Sachs, director, Harvard Institute for International Development , One Eliot Street, Cambridge, Massachusetts 02138, US Copyright Financial Times Limited 1997. All Rights Reserved.