IMF to Focus on Crisis Response, Policy Recommendations, and New Financial ArchitecturePress Release No. 08/308
December 18, 2008
The International Monetary Fund (IMF) will focus in the period ahead on helping its members respond to the financial and economic crisis, and on reforming the global financial architecture, IMF Managing Director Dominique Strauss-Kahn said during the Executive Board's discussion of the institution's work program on November 24.
"The International Monetary and Financial Committee and the G-20 leaders have emphasized the central role of the Fund as a crisis responder and a developer of ideas," Mr. Strauss-Kahn said in reference to guidance by the IMFC, the Fund's policy-steering committee, and the recent summit of advanced and emerging market countries. "We will take this mandate forward to help restore global financial stability and stimulate sustained economic growth."
"Meeting these front-line challenges will be difficult in a tight budgetary environment and will require exceptional focus and commitment. I am confident that the Fund with its dedicated staff and cooperative membership will deliver and help steer the world through these turbulent times," Mr. Strauss-Kahn said, adding that the Fund's work priorities will center on three key areas over the next months.
Timely financial support that meet members' needs:
Emergency Financing. The Fund has been and will continue to deploy its lending resources in substantial amounts both rapidly and flexibly in support of key policy measures that most effectively address the economic crisis, while mitigating the impact on vulnerable sectors of the population.
Reforming Fund Instruments. As the crisis spread, the Fund promptly established a new Short-Term Liquidity Facility (SLF) to help countries with strong fundamentals and domestic policies cope with short-term liquidity pressures arising from external market developments. Further, the Executive Board will examine other elements of Fund lending such as the scope for innovation and streamlining of its instruments and conditionality. It will also review access limits, maturities and charges, and the adequacy of Fund resources, along with options for supplementing them.
Fully understanding the causes and effects of the crisis:
Drawing lessons and Recommending Responses. The Fund is taking the lead in providing a comprehensive analysis of the causes of the crisis and the lessons for macroeconomic policy and regulation. Informed by this analysis, the Fund is developing recommendations for policy responses across these areas, both to exit the crisis and address longer-term challenges.
Early Warning. The Fund is intensifying work on monitoring systemic and country-specific vulnerabilities. More generally, the Fund will strive to be ahead of the curve, anticipating emerging issues to bring them to the attention of policy makers.
Impact on Low-Income Countries. The Fund will monitor closely the impact of the overlapping shocks caused by the global financial crisis and strained food and fuel prices on low-income countries. It will review low-income countries' prospects for macroeconomic stability, growth, balance of payments positions, and financial sector soundness. The Fund stands ready to support low-income members with technical and financial assistance and will be examining the need for adaptations of its policy and financial engagement with these members for better tailoring to their needs.
Contributing to improving the international financial architecture:
Coordinating Efforts. With its near universal membership, core macro-financial expertise, and mandate to promote international cooperation, the Fund is prepared to participate fully in the efforts to overhaul the rules governing financial markets. The Fund has a unique responsibility to provide the machinery for consultation and collaboration, allowing the entire membership to delve into these issues and embed these efforts into a unified framework for safeguarding global macroeconomic and financial stability.
Strengthening Collaboration. The Fund will work closely with the G-20 on the action plan outlined during the G-20 summit, and contribute to the efforts of the working groups set up by the G-20 for developing proposals on a range of issues, including enhancing sound regulation and strengthening transparency; reinforcing international cooperation and promoting integrity in financial markets, and reforming the International Financial Institutions. The Fund will also further strengthen its collaboration with the expanded Financial Stability Forum along the lines agreed with its chairman. In particular, they will collaborate to conduct early warning exercises on risks to systemic stability.
Advancing Surveillance. Work will continue on advancing surveillance priorities for 2008-2011 endorsed by the IMFC in October. In particular, the Fund will analyze the implications of the deleveraging process for credit creation and linkages across countries, as well as conditions for economic recovery from financial stress. A special Review of the Stability of the Exchange Rate System will also be undertaken; and a review of the Financial Sector Assessment Program (jointly with the World Bank) will be undertaken to assess the need for adaptations of this tool, drawing on the lessons from the financial crisis and evolving ideas on the new architecture.
While the Fund's priorities are focused on the global financial crisis, work on further governance reform and modernization continues. Mr. Strauss-Kahn reminded member countries to work toward domestic legislative steps required to take forward the Fund's governance reform and implement the quota and voice reforms and the Fund's new income model. "Timely action by members will enhance further the Fund's legitimacy, credibility, and effectiveness," Mr. Strauss-Kahn said.