IMF-World Bank Spring Meetings:
New emphasis on IMF's global monitoring role
With the worldwide recovery becoming more established but remaining
fragile on a variety of fronts, the IMF will step up its global economic
monitoring role to help countries anticipate looming problems and take
early action to avoid future crises.
"It is connecting the dots [between risks] that is extremely
important," said Singapore's Minister for Finance Tharman
Shanmugaratnam, who chaired a key ministerial meeting of the IMF's
policy-setting body, the International Monetary and Financial Committee
(IMFC).
"If I had to give one qualification to these Spring Meetings, [it
would be] that these are the meetings on strengthening Fund
surveillance," said IMF Managing Director Dominique Strauss-Kahn. The
Spring Meetings of the IMF and World Bank in Washington bring together
finance ministers and central bank governors from around the world.
They identified a slew of continued and emerging risks to the global
economy, including higher food and fuel prices, the disaster in Japan,
unrest in the Middle East, lingering unemployment in parts of the world,
and the risk of overheating in some dynamic emerging markets.
To keep track of these looming problems and other global risks, "we
have to be extremely watchful," Shanmugaratnam, the first Asian to hold
the chairmanship of the IMFC, told reporters.
"We also need to develop the capabilities of the Fund to address
risks proactively, to anticipate possible scenarios that could turn out
to be ugly, and to require that countries, including especially
systemically significant countries, take actions early to prevent
another major crisis."
New kinds of analysis
Strauss-Kahn said the IMF would pull together the different strands
of its work to produce a new consolidated report on multilateral
surveillance, that would include analysis about the possible impact or
"spillovers" of problems in one part of the world affecting others and
about policy actions by one country that could affect others.
Tracking spillovers required the IMF to be adroit, said
Shanmugaratnam, and to draw on a wider range of information and
involving expert opinion.
"We are at Year One of the new multilateral surveillance for the
Fund," Strauss-Kahn said. To underpin the new approach, the IMF was
working in three areas.
* Rethinking economic theories in the wake of the global crisis
* Rethinking policy advice, including, for example, advice on capital
controls
* Trying to improve the way multilateralism and global cooperation
functions
Progress at G-20
Building on their cooperative approach, finance ministers and central
bank governors of the Group of Twenty (G-20) industrialized and emerging
market economies separately moved a step forward by agreeing a set of
guidelines to measure potentially destabilizing imbalances in the global
economy.
The agreement-reached during the Spring Meetings in
Washington-provides a concrete basis for G-20 countries to assess each
other's economic policies, with a view to address large imbalances and
support the G-20's growth objectives.
The process will draw on independent analysis by IMF economists.
Help on the way for Middle East
Strauss-Kahn said that the IMF could provide finance for certain
Middle East countries of up to $35 billion. "We stand ready to help on
the technical assistance side, but also on the financing side," he said.
At an earlier seminar on the Middle East, the IMF Managing Director
said the Fund had learned lessons from unrest in the region, and
realized the need to look beyond traditional macroeconomic numbers to
get a truer picture of underlying trends.
We should look beyond this to the distribution of income, youth
unemployment, and how the society is doing," all of which "matter for
the sustainability of growth."
But he said the new governments and institutions would need help.
"For revolutions to succeed, it requires building democratic
institutions and providing them with macro stability. Otherwise you will
have a new wave of unrest."
Need to avoid complacency
Strauss-Kahn said that he had gone into the Spring Meetings saying
the international community needed to avoid complacency in the wake of
the immediate crisis "and now I am even more convinced of that."
He pointed to the need to take more action to
* Continue repairing the financial sector where the global crisis
started
* Do more to counter unemployment. "Growth is not enough. We need
growth to produce jobs."
* Tackle debt and fiscal problems in advanced economies
* Address risks of overheating in some emerging markets. At press
conferences, IMF staff in both Asia and Latin America warned of the
risks of economies growing too fast and overheating
* Cope with rising commodity prices and fears of inflation. African
finance ministers said their region should try to broaden their economic
base to become less dependent on commodities.
Work on capital flows
Ministers also discussed the issue of volatile and potentially
destabilizing global capital flows. The IMF has recently adopted a more
pragmatic approach to capital controls, saying they can be used on
occasion and in conjunction with other policies.
The IMFC communique said the Fund's recent work on managing capital
inflows "is a step that should lead toward a comprehensive and balanced
approach."
Ministers said such an approach should give "due regard to
country-specific circumstances." They urged the IMF to deepen its
analysis of global liquidity, the varied experiences of member countries
with capital account management, liberalization of cross-border capital
flows, and development of domestic financial markets.
IMF
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