UK's Darling wants bigger IMF surveillance role
WASHINGTON (Reuters) - The International Monetary Fund needs to beef up its oversight of the world economy and be held to account for its performance if future financial crises are to be prevented, British finance minister Alistair Darling will say on Friday.
As top officials from around the world gather in Washington this week to look for a way to end a credit crunch that has squeezed financial markets for eight months, Darling will say finance ministers must act to support the global economy in the short term.
But equally, there has to be reform of international bodies like the IMF to make sure they remained credible and were able to prevent future crises.
"The IMF must focus its surveillance more closely on financial sector issues and on the links between developments in the financial sector and the real economy," Darling will say in a speech in Washington, according to Treasury officials.
"The IMF should also strengthen its analysis of spillovers between economies, so that we have a better understanding of how difficulties in one country can be transmitted to another through the establishment of a multilateral surveillance department to shift the focus from national surveillance."
A UK Treasury official said the IMF should work closely with the Financial Stability Forum to form an early warning system where risks were analysed, mitigating responses were identified and mutually beneficial policy was proposed.
The FSF, set up in response to the Asian financial crisis in the 1990s and made up of central bankers and global regulators, has been working for the past eight months on guidelines for averting future crises like the one policy-makers are dealing with now.
"We want the fund to become more forward-looking and pro-active. It is fine to have excellent analysis after the event but also vital for the IMF to be forward-looking," the official said.
Multilateral surveillance must be the "fulcrum" of the IMF's work, and structural change so that departments were not organised on purely geographical lines might help, the official said.
While the IMF has conducted multilateral consultations with some countries in the recent past, its efforts have been hampered by a lack of political clout to ensure any recommendations were acted on.
The official said the IMF needs to be more credible with the ability to deliver candid policy advice that is acted upon.
To this end, Darling will propose on Friday that the IMFC, the fund's steering group that currently has an advisory role, be replaced with a ministerial council with real political authority.
The IMF board would then report to this council.
"A council would be one way to strengthen the credibility and accountability of the fund," Darling will say in his speech.
"The critical point is that all long-standing and established organisations need to be ready to change. Because without change, without reform, and without the ability to demonstrate leadership and innovation, they will become marginalised and ineffective."
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