Currency Debate Seen As Symptom of Deeper Problem

Disagreement on exchange rates symptom of deeper problem, says IMFC Chairman

Rebalancing of the global economy needed

Elements of IMF governance reform package coming together

On IMF reform, he noted that only a comprehensive agreement would have a chance of winning broad support.

The IMF-World Bank Annual Meetings are under way in Washington DC at a time of increasing strain in the global economy. Boutros-Ghali, the Chairman of the International Monetary and Financial Committee (IMFC), spoke to IMF Survey online about the problems facing the global economy and the prospects for reaching agreement on governance reform ahead of the meeting of the Leaders of the Group of Twenty (G-20) industrialized and emerging market economies in Seoul in November 2010.

IMF Survey online: The 2010 Annual Meetings of the International Monetary Fund and the World Bank are under way. What are the big topics on the agenda this year?

Boutros-Ghali: The biggest topic is the reform of the institutions. It’s time that we implemented all those reforms that we said we needed or that we agreed we would do.

The second biggest topic is the world economy. Are we out of the woods? Do we still have pitfalls? The world economy is not recovering as fast as we would have liked it to recover. Is there a problem? Do we need to do anything?

We had all the intentions of rebalancing the economy. The deficit countries had to move into surplus and the opposite had to happen. It’s not happening. Now, why is it not happening? And what is it that we can do to make it happen?

And, of course, as a symptom of all of this, there is the ongoing discussion, fairly vivid, about exchange rates. And that, too, is an issue that needs to be addressed within the confines of the IMF.

IMF Survey online: When the IMFC meets, will exchange rates be on the agenda? What progress do you think will be made?

Boutros-Ghali: Look, the exchange rate issue will be on the agenda, but, typically, it will not be on the public agenda. These are issues that you solve quietly in closed rooms, and try to find the common ground of all the parties involved about how we want to deal with the issue.

The exchange rate is one symptom of a deeper problem. And typically, that problem has more than one symptom. We just happened to latch on to the more obvious one, but there are other things that can be done to address the same issue and resolve the same problem. This will need to be handled quietly and in a...