IMF work to focus on fiscal strains, vote reform

WASHINGTON (Reuters) - IMF chief Dominique Strauss-Kahn said on Tuesday the institution's work over the next six months will focus on fiscal strains in advanced economies, financial regulation and IMF voting power changes.

Laying out the IMF's work program for the rest of the year, Strauss-Kahn said the Fund will assess how the policies of the globe's five major economies affect one another and the world economy as part of stepped-up IMF monitoring.

He said the "spillover reports" of China, the euro zone, the United States, Japan and Britain were planned for the next 18 to 24 months.

In a statement, the IMF Managing Director said recent turmoil in financial markets, rattled by concerns about the debt crisis in Europe, showed that the global economy remained vulnerable despite signs of recovery.

"The IMF must adapt to new challenges and make sure that it has the right tools to assess and mitigate risks to global stability and, when crisis prevention efforts are not enough, the right instruments to restore confidence."

The IMF has committed a record $188 billion to countries hit by the global financial crisis since 2008. Last month it approved a $40 billion loan for debt-stricken Greece, the first euro zone country to tap IMF rescue loans.

European leaders asked the IMF to stand ready to provide up to $310 billion as part of a $1 trillion package of loans and guarantees to prevent Greece's troubles from spreading.

Strauss-Kahn said securing a stronger, more sustainable global economy also required the IMF to tackle current and sometimes controversial issues "with rigor and balance."

The IMF has acknowledged it should have been more forthright in its warnings of excessive bank lending to the U.S. housing market in the run-up to the 2008 financial crisis.

Fund watchers have urged it to speak out more candidly on the policies of its member countries, including those in Europe and the U.S.

Strauss-Kahn said the IMF's regular economic reports, including its World Economic Outlook -- a health-check of the world economy -- will from now on include analysis on the impact of fiscal consolidation measures in advanced economies.

The IMF has increased calls for major economies to get their public finances under control in the face of the debt crisis in Europe even if it impacts growth, referring mainly to European countries saddled with huge debts.

Strauss-Kahn said the IMF would examine financial regulatory incentives across countries and look at ways in which banks can cover the costs of any future bailouts.

Over the next months, the IMF will also assess the increasing role of major emerging market economies, such as China, in the global economy. This will include economic and financial linkages among these countries, as well as between emerging markets and poorer economies.

Strauss-Kahn said the Fund will also look at its response to economic crises, including through new lending instruments.

He said "substantial work" needs to be done to complete a review of the IMF's power structures, which will likely increase the votes of big emerging economies like China, before a deadline in January 2011. He emphasized that voting changes were necessary to restore the IMF's legitimacy amid the rising economic clout of emerging powers such as China, India and Brazil.

"This is a highly ambitious agenda and reaching consensus on many of the proposed reforms will present challenges," Strauss-Kahn said. "However, these reforms are essential to the legitimacy and effectiveness of the Fund," he added.

(Reporting by Lesley Wroughton; Editing by Phil Berlowitz)