Rodrigo Rato wants rich and poor countries to use the strong economic tailwind to pursue broader reform. In his first annual meeting as IMF managing director, Rato yesterday outlined his thoughts giving centre stage to the global economy, crisis prevention and aid to low income countries.
True to his reputation as an aggressive and successful modernizer in his former role as Spain's finance minister, Rato positioned himself as a hawk on budget deficits. He stressed that strong growth provides a rare opportunity for the developed and developing world to enact painful reforms.
Building on this theme, Rato repeated criticism of developed countries, in particular the US. "We believe that, in the US case, the extraordinary expansion of monetary and budgetary policy has to cease... the reduction of the public deficit is certainly essential."
He also called on Japan to enact deeper reforms and the EU to do more to encourage growth, tartly noting that the performance of European economies in the last 10 years "has been unsatisfactory in terms of growth." Although he clearly felt confident in discussing the developed world, Rato's relative inexperience of the emerging markets came through in answering questions on Brazil and India where he deferred to Anne Krueger, deputy managing director.
Other details remain relatively scant. On crisis prevention, Rato sketched an outline plan to better target advice through more candid conversations with client and donor countries and place greater emphasis on transparency ? themes echoing those of his predecessor, Horst Kohler. Rato noted that 75% of Article IV consultations are now made public (although the onus remains on the country and not the Fund to publish them).
On low-income countries, he stressed that he would seek to co-operate more closely with other international financial institutions, especially the World Bank. Unusually, he saw this as a prime focus and came back to the subject several times, adhering closely to the line that the Fund's role will be to provide mechanisms to ensure aid is provided in the most effective ways.
The speech left a number of questions unanswered. Rato's appointment was criticized by many who said that he does not have the political experience to make headway at the highly-politicized Fund. Indeed, he has yet to prove that he can make the transition from technocrat to diplomat. His reception in Argentina is serving as a reality check. Greeted by riots in Buenos Aires on August 31, President Kirchner pointedly told him "don't even dream of it" when Rato suggested that the country set aside more of its 2005 budget for future debt payments. Latin politics are certain to test the diplomatic mettle of the Spanish technocrat.