Financial Crisis Shapes IMF Work Priorities

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Page 188

The IMF's Executive Board has agreed on the Fund's priorities for the period leading up to the IMF-World Bank Spring Meetings in April 2009, focusing on shortand longer-term consequences of the global financial crisis. This work program is in line with requests from the International Monetary and Financial Committee (known as IMFC, the IMF's policy-steering committee) and the Group of Twenty leading industrialized and emerging market countries (G-20).

A main focus of the IMF's efforts will be to ensure continued financial support and policy advice for the growing number of countries that are buckling under the strains of the financial crisis. But the IMF will also devote significant resources to understanding the causes of the financial crisis and identifying reforms needed to improve the international financial architecture.

The discussion of the IMF's short-term priorities takes place against the backdrop of a worsening global economy. In its latest assessment, the IMF cut its forecast for global growth by ¾ percentage point to 2.2 percent for 2009. A growing number of countries are seeking financial assistance from the Fund, and new loans worth a total of $40 billion have been approved in record time for Ukraine, Iceland, Pakistan, and Hungary.

Aligning priorities

The IMFC sets the overall direction for the IMF's work. But the work program, agreed by the Executive Board on November 24, has also been aligned with the outcome of the November 15 meeting of the G-20.

The G-20 has called for both immediate and longer-term actions to stabilize the financial system, stimulate domestic demand, help emerging and developing economies battered by the crisis, and strengthen the regulatory framework.

"The IMFC and the G-20 leaders have emphasized the central role of the Fund as a crisis responder and a developer of ideas," IMF Managing Director Dominique Strauss-Kahn said. "We will take this mandate forward to help restore global financial stability and stimulate sustained economic growth."

Strauss-Kahn stressed that the IMF will be working closely with other international institutions. One such partner will be the Financial Stability Forum (FSF), which plans to expand its membership to include emerging market countries. The IMF and the FSF have published a joint letter saying they intend to step up cooperation in key areas such as early warning exercises and...