IMF searches for role in global credit crisis

By Lesley Wroughton - Analysis

WASHINGTON (Reuters) - The International Monetary Fund, which ladled out billions of dollars in the past to rescue developing nations from economic peril, is struggling to find its feet in the current global credit crisis affecting rich-world countries.

Some IMF members want the global lender to step up its monitoring of global economic activity in order to heighten its profile in a world complicated by the rising influence of emerging economic powers and the explosive growth of cross-border capital flows.

In fairness, IMF officials have warned for years that the U.S. housing market was soaring at an unsustainable pace and that Americans were saving nothing, but that has not spared it from criticism that its calls for action were ineffective.

Current disruptions in global credit markets, due to losses suffered in the U.S. mortgage market, are different in scale and nature from the problems faced by smaller developing economies that were the IMF's focus in the past.

"The issues posed by the latest developments are extremely different from those that were the hallmark, for example, of the 1980's debt crises or even the 1997-98 Asian currency crisis and its aftermath," IMF First Deputy Managing Director John Lipsky told Reuters.

"The development of large-scale capital flows has changed the elements of judgment about what is sustainable and what is desirable in terms of economic and financial policy," he said.

Furthermore, the economic landscape has been complicated by the growth of record current account imbalances and the power of government-owned wealth funds and pension funds.

"All of these have rendered the situation significantly different that what we would have thought of before," Lipsky added.