IMF Survey: IMF Stepping Up Focus on Global Systemic Stability
October 9, 2010
- Strauss-Kahn says IMF reform package near completion
- Some divergent views, but “I think we are on the right track”
- IMFC says action needed to improve surveillance, policy collaboration
The IMF will step up its focus on global systemic stability and is closer to wrapping up a package of reforms that will make the 187-member institution more representative and better able to tackle the economic problems facing a globalized and interconnected economy, IMF Managing Director Dominique Strauss-Kahn said.
IMF POLICY-SETTING BODY
At the end of a meeting of the IMF’s policy steering committee, the Managing Director expressed optimism about completing a series of reforms that will make the IMF more reflective of the new global economy by increasing the say in the institution of the dynamic emerging markets now leading the world out of recession.
“We have gone extensively into reform of the IMF—quotas, governance with all its components, the composition and size of the Executive Board,” said Youssef Boutros-Ghali, the Egyptian Finance Minister who is head of the International Monetary and Financial Committee (IMFC) of the Fund.
“There has been extensive progress. All of the parties involved are converging toward a package that we think will move the institution toward a new level, make it more adaptable and capable of dealing with the problems that have become multilateral in most of their features,” Boutros-Ghali said.
The meeting was part of the IMF-World Bank Annual Meetings in Washington that have gathered around 10,000 central bankers, ministers of finance and development, private sector executives, labor leaders, civil society representatives, and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
Uneven global recovery
In a communiqué, the IMFC said that the economic recovery around the world was proceeding, but remains fragile and uneven across the membership.
“Faced with this source of potential stress, we underscore our strong commitment to continue working collaboratively to secure strong, sustainable, and balanced growth and to refrain from policy actions that would detract from this shared goal,” the communiqué said.
Ministers said their priorities were to address remaining financial sector fragilities; ensure strong growth in private sector demand and job creation; secure sound public finances and debt sustainability; work toward a more balanced pattern of global growth, recognizing the responsibilities of surplus and deficit countries; and address the challenges of large and volatile capital movements, which can be disruptive.
They said rejection of protectionism in all its forms must remain a key element of a coordinated response to the crisis and renewed efforts were urgently needed to bring the Doha trade talks to a successful conclusion.
Urgently action was also needed to reinforce the IMF’s role and effectiveness as a global body for macrofinancial surveillance and policy collaboration.
Strauss-Kahn, who throughout the meetings has stressed the need for renewed cooperation to tackle global problems, told reporters that he expected IMF members to agree in either days or weeks on needed reform of the institution. We are still not there, but not far off.”
“Still some divergent views, but I am used to this. I think we are on the right track.”
The aim is for a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented to under-represented countries by January 2011. In addition, there is a commitment to protecting the voting share of the poorest members.
But Strauss-Kahn emphasized that countries getting an increased quota share needed to play a correspondingly bigger role in stabilizing the global economic system. “They cannot be at the center and be a free rider. The more they are at the center, then you need to take part in stabilizing the system. That is the logic.”
Boutros-Ghali said that the quota and voice reforms, coupled with improvements in how the IMF monitors the global economy, would make the institution better able to face the future.
Strauss-Kahn said that systemic stability was an issue of paramount importance, and the IMF is the institution best placed to address it. The IMF was introducing new “Spillover Reports” that would assess the impact of policy actions in major economies for other parts of the world.
As a sign of the importance attached to these issues, the Managing Director said he will attend the concluding meetings of the annual Article IV surveillance missions to each of the systemic countries or regions—the United States, the United kingdom, the Euro area, China, and Japan. These are first steps, and other tools are being developed and refined.
The IMFC said that stronger and evenhanded surveillance to uncover vulnerabilities in large advanced economies is a priority. Surveillance should also be better focused on financial stability issues and their macroeconomic linkages, and more attentive to cross-border spillovers.