Post-Toronto, IMF sets out ideas
Builds on crisis response :
As the world edges toward recovery, IMF Managing Director Dominique
Strauss-Kahn briefed economists, analysts, and reporters at the Peterson
Institute for International Economics, a Washington think tank, on the
main outcomes of the weekend meeting of the leaders of the Group of
Twenty (G-20) in Toronto, and looked ahead to a new round of reforms at
the IMF to enable it to be even more effective for its member countries.
Strauss Kahn |
He said that the Toronto summit of leading industrialized and
emerging market economies showed that the 'spirit of international
collaboration is still alive.' In the run-up to the meeting, he noted
that there had been reports of disagreement within the G-20 over whether
the priority facing the world now was for fiscal consolidation or
growth. In fact, he said that while it was agreed at the summit that
policy responses should be tailored to individual country circumstances,
it was also agreed that what the global economy needed is 'fiscal
consolidation and growth.'
The Managing Director also noted that IMF analysis underpinning the
G-20's Mutual Assessment Process (MAP), aimed at achieving balanced and
sustainable growth, showed clearly that even greater policy
collaboration could lead to an increase of 2.5 percent in global growth
and 30 million new jobs.
Strauss-Kahn said that the summit had also agreed on the need for
further reform of the financial sector. He added that while there had
not been consensus on the need for a 'global' financial tax, it was
encouraging that several major countries had decided to move forward
with their own versions of this measure.
The Toronto meeting had recognized the effective role played by the
IMF during the crisis, including over $200 billion in lending to help
contain the spread of the crisis and soften its impact on the
populations affected. Strauss-Kahn said that now was the time to think
about how the IMF can be even more effective in the future, by
clarifying and improving its 'mandate' and approach to its work in
several areas. He focused his remarks on lending, surveillance, and
governance.
Strengthening IMF Lending
Noting that there are still gaps in the 'global financial safety
net,' Strauss-Kahn said that further reform of the IMF's lending
instruments to make them more flexible could provide another step in
this direction. He said that ideas being discussed included:
Enhancing the Flexible Credit Line: Introduced during the crisis, the
credit line is available for 'platinum customers' without preconditions.
Strauss-Kahn said the IMF was considering enhancing the FCL by expanding
its duration and removing the cap on access.
Introducing a new Precautionary Credit Line: The IMF is thinking
about this new instrument for countries with similar needs as for the
FCL but that do not quite meet the qualification criteria, but in
return, some limited ex-post conditionality would be required.
Establishing a mechanism to address systemic crises: To deal with
systemic crises, it might be possible to establish a coordinated
mechanism to pro actively channel large-scale liquidity to countries
under pressure. To be effective, these resources would need to be
deployed quickly, and focus on countries that might propagate the shock,
whatever its origin, across the world, to stop the falling dominoes.
To get around the problem of countries not wanting to be first to
borrow from the IMF, the Fund might pro actively invite a group of
countries to use this facility, or even publicly offer the assistance to
a set of qualifying countries at the same time.
Synergies with regional arrangements: The IMF is also exploring ways
of cooperating more closely with regional financing arrangements,
including in the context of global liquidity provision. The IMF's recent
partnership with Europe represents a new and innovative mode of
cooperation which might be applicable in other regions.
While it was still too early to get into details, Strauss-Kahn said
that these were the kinds of ideas being discussed by staff at the Fund,
and would, of course, be subject to approval by the IMF's Executive
Board.
Strengthening IMF economic surveillance
"We need a new surveillance toolkit for a new era," Strauss-Kahn
said. To improve its oversight at the global, regional, and country
level and strengthen its early warning capabilities, the IMF is planning
to enhance its efforts in the following areas:
* Understanding macro-financial risks: Strauss-Kahn said
macro-financial stability should be front and center of IMF
surveillance. While the IMF 'does not aspire to be a global regulator,'
he said that the Fund does need to get a better handle on the
complicated nexus of exposures, cross-exposures, and the shifting
pattern of asset and liability concentration across regions and
institutions. To do this, the IMF needs to improve access to necessary
data, working with national supervisors and the Financial Stability
Board.
* Enhancing multilateral surveillance: To get a better handle on the
linkages that underlie the global financial system, the IMF plans to
introduce new "spillover reports" starting with five systemic economies,
China, the Euro Area, Japan, the United Kingdom, and the United States,
over the next eighteen months, to assess how policies in these economies
might affect global and regional stability.
* More relevant bilateral surveillance: Individual country
assessments remain one of the main tasks of the Fund. To improve its
effectiveness in this area, the IMF is looking at producing more "
thematic multi-country" reports, to better leverage its cross-country
experience for the benefit of all its members.
Strengthening IMF governance
Strauss-Kahn said that building on its 2008 reforms, the IMF will
move ahead with a further, targeted quota shift of at least 5 percent,
to give a greater voice to dynamic emerging markets and developing
countries. "We are committed to seeing this through ahead of the January
2011 deadline. It is ambitious, but doable."
- IMF.org |