(Does anyone understand the dynamics at the IMF right now? Is there a
tiny bit more fiscal space and encouragement for int'l borrowing from
these bastards? Does Strauss-Kahn see a time when bastard Keynesianism
should extend to emerging markets?)
IMF-WORLD BANK ANNUAL MEETINGS
'Istanbul Decisions' to Guide IMF as Countries Shape Post-Crisis World
IMF Survey online
October 6, 2009
* IMF head says world must cooperate even more to build post-crisis world
* Underscores Fund's role in global economic cooperation, recovery
* Welcomes "Istanbul Decisions" to guide IMF over coming year
IMF Managing Director Dominique Strauss-Kahn told policymakers from 186
countries gathered in Istanbul that global cooperation had saved the
world from a far worse crisis and leaders should now seize the
opportunity to shape a post-crisis world.
A year ago, people feared the worst. But after concerted action to
combat the crisis, the world had pulled back from the brink. “Even if it
is much too early to declare victory, we have at least stepped onto the
road to recovery.”
Speaking at the IMF-World Bank Annual Meetings being held in Turkey,
Strauss-Kahn told the world’s economic and monetary policymakers they
have an historic opportunity to create the conditions necessary for “a
virtuous cycle of peace and prosperity” if they continue to work
together and with the IMF on key policy measures.
Strauss-Kahn noted the “profound change” that formal and informal
cooperation among nations had brought, adding that “in the face of
crisis, countries came together to face common challenges with common
solutions, focusing on the global common good.” The IMF chief pointed to
fiscal stimulus amounting to nearly 2 percent of world gross domestic
product in the past year as a critical factor in staunching the crisis,
and he stated that countries are moving to address key weaknesses in
their financial sectors, which will further underpin recovery if they
stay the course on these reforms.
‘Istanbul Decisions’—four reform areas
He told delegates that “We have come a long way, but the journey is not
over.” Coming out of the October 4 meeting of the International Monetary
and Financial Committee (IMFC), the policy-steering committee asked the
Fund to address four key reform areas—the IMF’s mandate, its financing
role, multilateral surveillance, and governance. These “Istanbul
Decisions,” he said, will be a focal point of IMF activities for the
coming year.
The committee agreed to maintaining stimulative policies until global
economic recovery is assured, and backed moves to reform governance of
the Fund to give greater voice to dynamic emerging markets and
developing countries.
The four decisions comprise
• A review of the mandate of the IMF, to encompass the whole range of
macroeconomic and financial sector policies that affect global stability.
• Assessing how to build on the success of the Flexible Credit Line and
provide insurance to more countries as the lender of last resort. Given
that IMF resources are limited relative to the precautionary demand for
reserves, the IMFC asked the Fund to look at whether enhancing its
financing instruments and facilities might help it better address this
issue.
• An assessment of whether the Fund’s enhanced financing instruments,
such as the Flexible Credit Line, could help address the question of
global imbalances by reducing the need for countries to self-insure
against crisis by building up large reserves.
• The IMFC endorsed the Group of Twenty proposal for the IMF to help
with their mutual assessment of policies. This represents a new kind of
multilateral surveillance for the IMF.
• The panel endorsed the big step forward on the governance front agreed
by the G-20. This will shift quota shares toward dynamic emerging
markets and developing countries by at least 5 percent from
over-represented to under-represented countries, by January 2011.
Defining moment for world economy
“And now, we stand at a defining moment,” he stressed. “We know from
history that when the nations of the world come together to address
common challenges in a spirit of solidarity, we can attain a virtuous
cycle of peace and prosperity, and avoid a vicious cycle of conflict and
stagnation.”
The Managing Director urged countries to “seize this opportunity to
shape the post-crisis world,” adding that all nations “need to adapt and
change” and that the IMF must change too. “In this modern globalized
world, it no longer makes sense for global economic policy to be the
concern of just a small group of countries. Reflecting this new reality,
one of the great changes over the past year has been the ascent of the
G-20—a group that includes the dynamic emerging economies.
“It was the leadership of the G-20 that harnessed the immense policy
cooperation throughout the world. And recently in Pittsburgh, G-20
leaders emphasized that the global collective interest must always
infuse national policy decisions.”
Build on momentum
“We must build on this momentum. The G-20 is more representative than
the G-7, but there are still many countries left out, especially in
Africa. There are 186 countries in our membership. These countries
include the low-income countries, home to billions who still live in
poverty, who remain economically marginalized. Their voices too must be
heard. They too deserve a stake in the global economy. We need
cooperation among all the countries of the world,” he said.
In this context, the IMF is ready to promote and foster deeper global
economic cooperation. But the Managing Director urged the finance
ministers and central bank governors to step forward with the necessary
commitments to enhance the Fund’s legitimacy among its wide membership.
This starts with a review of the IMF’s mandate “to encompass the whole
range of macroeconomic and financial sector policies that affect global
stability,” noting that “This crisis had very little to do with current
accounts and currency movements, the traditional focus of the Fund’s
attention. In an era of high-volume and fast-moving capital flows that
can extend to every corner of the world, we need a broader mandate.”
Reform implementation lagging
It also involves coming to a firm decisions on the shift in IMF quota
shares toward dynamic emerging markets and developing countries by at
least 5 percent from over-represented to under-represented countries by
January 2011. “This boosts our legitimacy, and represents a significant
down payment on our future effectiveness,” he said. “But as we talk
about the future, implementation of past reform is lagging—only 36 out
of the needed 111 countries have passed the legislation related to the
2008 quota and voice reform. I urge countries to move ahead here as
quickly as possible.”
“At the end of the day, the endeavor we have embarked upon together is
about peace and stability. It is about the welfare and security of the
almost 7 billion people who share our planet. As John Maynard Keynes
noted at the founding of the IMF, the hope was that ‘the brotherhood of
man will have become more than a phrase’. We have a historic opportunity
to reshape our post-crisis world—and to make this phrase a reality,” he
concluded.
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