The International Monetary Fund and the World Bank must be weary of facing endless criticism from development campaigners and debtor countries.

But this year a sharper, more immediate threat defined the debate over what the international financial institutions should be doing. As part of the legislation authorising the US funding for the IMF in 1998, the US Congress set up a commission under the economist Allan Meltzer to study the possibilities for reform.

Its highly critical report, published in March this year, has set the terms of the debate on the role of the international financial institutions (IFIs) and forced them and their key shareholders to justify their existence.

It recommended radical reductions in the role of the IMF and the World Bank. The report said that the IMF should pull out of all medium and long-term lending, and leave developing and transitional economies to the World Bank. Its role should be limited to providing short-term lending to solvent but crisis-hit countries to support them through periods of liquidity shortage.

With regard to the World Bank, the commission said that the regional development banks should take over the primary role of promoting development in Latin America and Asia, with the World Bank taking the lead in Africa until the African Development Bank was ready to assume responsibility. The banks should phase out lending to any countries which already enjoyed access to capital markets, and should switch from long-term loans to grants for the remaining poor countries.

The report's conclusions were sweetened for some with a crowd-pleasing suggestion - that this drastic package of reductions be accompanied by a complete write-off of all debt claims by the Fund and the Bank against the heavily indebted poor countries, as long as they followed an effective development strategy.

The difficulty for the US administration - which, as the IFIs' largest shareholder, has a particularly strong influence on their direction - was that these suggestions found some echoes in its own thinking. Larry Summers, the US Treasury secretary, had already called for a slimmed-down IMF to concentrate on crisis lending - though he was keen for it to continue its role in the heavily indebted poor countries process.

Meanwhile, once the interminable process of appointing a new head of the IMF had finally come up with the former German finance ministry official, Horst Kohler, many believed he, too, would be sympathetic to the idea that the IMF should be more of a debt collector and less of a development agency.

But, after the report was published, it became clear that the US - or at least its present administration - was not considering the type of radical restructuring of the Fund that the Meltzer commission suggested. Mr Summers said that Mr Meltzer's proposals would mean denying emergency lending to countries unless they had pre-qualified for assistance - a policy unlikely to be of much help in dealing with systemic financial crises.

Other G7 countries, including the UK, also weighed in with implied or actual criticisms of the suggestion that the IMF should pull out of development lending.

Meanwhile, one of Mr Kohler's first public remarks after taking over the job was that while it needed reform, there was "no need to turn the IMF upside down".

The Meltzer commission's report on the World Bank was similarly criticised by many observers, who pointed out that having access to capital markets did not mean that countries could borrow for long-term restructuring or capital projects. They also said that replacing loans with grants would severely restrict the Bank's capacity to extend financial help.

Since then, there have been few new radical suggestions for the roles that the Bank and Fund should be playing, and no immediate threat of a radical downsizing. Mr Kohler will set out his vision for the Fund at the annual meetings, but he is expected to concentrate on simplifying and streamlining programmes rather than a wholesale withdrawal from key areas of activity.

The debate over the role of the Fund has become more technical, with the IMF concerning itself with proposals for repricing loans to deter countries from becoming repeat long-term borrowers, rather than abandoning structural lending altogether.

The Bank, which is in the middle of a long process of recasting itself as an overarching development agency, may have more work to do to convince development campaigners that it is the institution best suited to that role. Complaints about the bank breaking its own rules and failing to consult continue, particularly after the high-profile cancellation of its loan package to western China this summer.

With the expansion of its role comes the Bank's realisation that political issues have become more important. Its ability to handle these highly-charged questions, particularly when its member governments often disagree on the extent to which politics should be allowed to determine its decisions, will be a recurrent challenge in years to come.