The chairman of the International Monetary and Finance Committee (IMFC) yesterday said it should have executive power to spearhead a strengthened IMF.
The Fund should “the main engine for coordination of [economic] policies across the world”, IMFC chairman Youssef Boutros-Ghali said.
This would mean that the IMF becoming chief among the “family of Gs” or groups of countries that coordinate economic policies, an IMF official told Emerging Markets.
After the IMFC met in Istanbul yesterday, Boutros-Ghali told Emerging Markets that the committee – a group of 24 finance ministers from leading advanced and emerging economies who oversee the executive board – could move from an advisory role to an executive one.
“The issue is going to become one of broad restructuring,” he said. “The IMFC is an advisory body and we give the executive board advice. It has been put forward that the IMFC should be a decision-making board. The questions of when and how are still on the table.”
Today the Group of 30 senior financiers and academics will issue a report on IMF reform that may advocate setting up an executive body comprised of politicians, instead of full-time officials as at present. Stanley Fischer, governor of Bank of Israel and co-author of the report, has this weekend told Emerging Markets that such a body could be modelled on the G20.
Boutros-Ghali told a press briefing that the IMF’s mandate, which was finalised more than 60 years ago, needs to be “revisited”. To this end, the IMFC called on the Fund to “review its mandate, to cover the full range of macroeconomic and financial sector policies that bear upon global stability and to report back to the IMF by the time of the next annual meeting.
The IMF needs to “evolve and to codify” the new and expanded role it has taken on since financial crisis and global recession erupted, Boutros-Ghali.
This process will include governance issues such as “rebalancing of the voting shares and the voice of various countries to reflect more existing realities of the world economy.”
This will “not happen overnight,” Boutros-Ghali said. “We are reforming an organisation that is complex, sophisticated and reaching every corner of the world economy.”
At the end of a week when world markets dipped, Boutros-Ghali set out the most optimistic view of the world economy heard in Istanbul this weekend. He said the IMFC had had its “first non anxiety-ridden meeting” in 18 months.
“Signs in the world economy allow us to be optimistic,” the Egyptian finance minister said at a press briefing. “We don’t want to get carried away but things are looking up, Growth rates are returning to positive territory.
“Systemic risks are coming down and the financial sector is probably recovering. We now need to make sure that this recovery continues to go forward and establish itself. We are not out of the woods yet but we are well on our way.”
IMF managing director Dominique Strauss-Kahn suggested that global financial and economic crisis “should be behind us within ten to 12 months” and that now is a “unique opportunity to reshape the world after the crisis.”
Picking up this theme, the IMFC called on the IMF to support proposals from the G20 Pittsburgh summit for mutual economic assessments by the 20 leading advanced and emerging economies that it represents.
The IMF should “develop forward-looking analysis of whether policies are collectively consistent with more sustainable and balanced trajectories for the global economy,” the IMFC said in its communique.