IMF Survey: IMF Work Program Builds on Reform
December 19, 2007
- Board discusses four-month program for reform
- IMF drawing lessons from recent market turbulence
- Crowded work agenda for institution
The IMF's Executive Board has released the institution's work program for early 2008, with the emphasis on accelerating the process of reform under way over the past few years.
IMF Executive Board
As the global economy and financial systems evolve, the work program focuses on how the Fund is adapting to meet the needs of its members individually and as a whole.
In discussing the proposed work program with the Board, Managing Director Dominique Strauss-Kahn said that "Enhancing the Fund's relevance and legitimacy and ensuring the Fund's financial soundness are our two critical priorities in the period ahead." He added that "Addressing these challenges concurrently will provide an opportunity to reestablish the Fund as a focused, lean, and responsible organization."
The Board welcomed the proposed work program, underscoring the importance of making progress on reform of country representation (quota and voice reform) and appreciated the openness of the ongoing discussions on the budget and on refocusing the IMF.
Strauss-Kahn, who took over as Managing Director in November, also said that the IMF had a key role to play in helping members limit the impact of the recent credit crunch. The IMF would help draw lessons from the crisis, which has slowed world growth and exposed weaknesses in the global financial infrastructure. The IMF will announce an update to its forecast for global growth on January 29.
In his statement to the Board, Strauss-Kahn outlined an interim work program until the April Meetings of the Fund's policy guidance body, the International Monetary and Financial Committee (IMFC), when he expects to get endorsement for key areas related to the ongoing reforms. These are:
Economic and financial market surveillance. A key objective is to make surveillance more effective at the country, regional, and global level. This will be within reach provided the recently updated surveillance framework is implemented in a consistent and evenhanded manner and that issues are framed in a global context to make better use of the Fund's universal reach and macrofinancial expertise. The Board will also begin work in early 2008 on the regular evaluation of the effectiveness of surveillance (the Triennial Surveillance Review).
Regarding the analysis of the financial turbulence around the subprime meltdown in the United States, the IMF—working with other institutions—is addressing issues such as the transparency, valuation, and methods of accounting of off-balance sheet instruments used by large banks; risk management practices and incentives structures; and the principles for prudential oversight for regulated financial entities. In addition, the Fund will be looking at issues for investors and recipients related to sovereign wealth funds, including a dialogue on identifying best practices.
IMF income and expenditure. Reform of IMF expenditure and income will be tackled simultaneously. Strauss-Kahn has launched a program to come up with expenditure cuts totaling around $100 million on an annual basis, including by reducing the number of staff, which is currently above 2,600, by 300-400. The Fund is also looking at ways to find sustainable sources of income, and a final set of proposals could be discussed by the Executive Board in the first part of 2008. The IMFC has requested specific proposals on a new income model and expenditure framework by the time of the April meetings.
IMF governance reform. The IMF is in the middle of a two-year program to reform the system of quota shares to reflect members' evolving weight in the global economy. The program, launched in Singapore in 2006 to enhance the IMF's legitimacy, began with an ad hoc increase for the four most underrepresented countries: China, Korea, Mexico, and Turkey.
IMFC chairman Tommaso Padoa-Schioppa recently noted that in his view enough progress had been made over the past year to give hope that the essential elements of a reform package could be worked out by the next IMFC meeting, which will be held in Washington on April 12, 2008. The objective is to finalize the reform at the Annual Meetings in October 2008.
Low-income countries. The IMF Board will discuss the Fund's assistance to post-conflict countries and fragile states in January. The IMF Board also plans to undertake a comprehensive assessment of the Fund's role in low-income countries later in the year after publishing a series of papers during 2007 clarifying its role in these countries.
Capacity building. The IMF Board will discuss ways to implement a new medium-term strategy for technical assistance in early 2008. The Board will also consider the Fund's training program for member country officials and assess strategic options for the future.
Crisis prevention. Fund management will present to the Executive Board an overview of issues that could arise in possible financial crises of the future and the implications for the Fund's role in crisis prevention and resolution. Discussions will also continue on a new liquidity instrument for emerging market countries.