The world’s top financial and development officials will review the outlook for the global economy and assess progress with the IMF’s medium-term strategy during the Spring Meetings of the IMF and the World Bank in Washington, D.C., on April 14–15. Managing Director Rodrigo de Rato will present a report to the IMF’s International Monetary and Financial Committee (IMFC) outlining progress on a range of key issues since the IMF–World Bank Annual Meetings, held in Singapore last September.
The IMFC, chaired by U.K. Chancellor of the Exchequer Gordon Brown, will review the outlook for the global economy. Despite the recent turmoil in financial markets and concerns about the housing market in the United States, the IMF’s World Economic Outlook predicts that strong global growth will continue, albeit at a somewhat reduced pace (see pages 84–85). De Rato is expected to brief the IMFC, the primary advisory committee of the Fund’s Governors, on progress with reducing global payments imbalances through multilateral consultations. The IMFC will also hear from Pascal Lamy, Director of the World Trade Organization, on the status of world trade talks.
The IMFC endorsed de Rato’s medium-term strategy for the Fund at the Spring Meetings last May. Since then, the 185-member institution has been working to revamp operations in a number of areas, including its surveillance of global, regional, and country economies; help for low-income countries; governance of the IMF; and its income position.
Surveillance: The IMF is modernizing its surveillance framework and strengthening its monitoring and assessment of the financial sector and capital markets (see pages 94-95). It is also discussing with members possible revisions in its approach to surveillance of exchange rates. But de Rato said in a speech prepared for delivery to the Peterson Institute for International Economics in Washington on April 9 that there were limits to what the Fund could do. “The Fund can advise, but we cannot and should not dictate to our members on the choice of their exchange rate regimes, their intervention policies, or their exchange rate levels,” de Rato stated. “Indeed, in a world of globalized financial markets, there are limits to what countries can do to influence exchange rate levels. The days when a group of finance ministers could sit in a hotel room and decide currency values are over.”
Multilateralconsultations: The IMF has held meetings over the past year with key economies—China, the euro area, Japan, Saudi Arabia, and the United States—to discuss how to wind down global payments imbalances gradually while maintaining world economic growth. In his April 9 speech, de Rato said the IMF aimed to solidify agreement on an approach for a gradual reduction in the imbalances. He said the work was well advanced and that he would have more to say after the IMFC discussion.
Low-incomecountries: De Rato said that the Fund would focus on what it can do best and on tasks where it can make the greatest contribution in helping low-income countries. The recently issued Malan Committee report on Fund-Bank collaboration also pointed in this direction, he stated, adding that he expected growing interest from countries in the IMF’s Policy Support Instrument (see pages 92–93).
Quotasandvoice: The IMF is pressing ahead with what is envisaged to be a two-year process of reform designed to update the representation of members and modernize the governance of the 62-year-old institution (see IMF Survey, February 26, 2007). After an initial round of ad hoc increases last September for four economies that were clearly underrepresented (China, Korea, Mexico, and Turkey), the IMF has now embarked on the second and more far-reaching phase of the reform process. The IMFC is expected to review progress so far, and the Fund’s objective remains to come back to the IMFC with proposals on a new quota formula by the next Annual Meetings, if possible.
IMFincome: Andrew Crockett, head of a committee that looked at alternative ways of financing the IMF, has been invited to brief officials about the committee’s proposals, which were presented at the end of January. The proposals include investing a portion of the IMF’s quota resources to generate a regular income flow and limited sales of gold (of about one-eighth of the Fund’s total gold holdings) to establish an income-generating endowment (see IMF Survey, February 12, 2007).