New Emphasis on International Monetary Fund's Global Monitoring Role

New Emphasis on International Monetary Fund's Global Monitoring Role

Tharman Shanmugaratnam, the Singapore's Minister for Finance Minister for Finance, who chaired a key ministerial meeting of the IMF's policy-setting body, the International Monetary and Financial Committee (IMFC) explains that, “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, Shanmugaratnam.

“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.

“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.” said, Shanmugaratnam.

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.”

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.

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 communiqué 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.

By spokesperson

Ingiahedi Mduma

Ministry of Finance

19/4/2011