Köhler submits statement to IMFC on IMF in process of change

• Pages: 135

Page 135

Following is a summary of the statement "The IMF in the Process of Change," submitted by IMF Managing Director Horst Köhler to the April 29 meeting of the IMF's International Monetary and Financial Committee (IMFC).

In his written statement to the IMFC, IMF Managing Director Horst Köhler discussed the critical challenges for international cooperation, in the face of the weakening of world economic activity, and his priorities for further reform of the IMF in the coming months. In particular, he underscored the need for proactive policies to strengthen prospects for global economic growth, especially in the poorest member countries, and the need for the IMF to work harder to put crisis prevention at the heart of its activities.

Global economy

Recalling the theme of the 2000 Annual Meetings, Köhler noted that the importance of international cooperation had become even clearer "in light of the interdependencies and spillovers revealed by the current slowdown in world economic activity." The deceleration of the U.S. economy had been deeper and faster than expected, and declines in world equity markets and the financial difficulties faced by Argentina and Turkey heightened further the risks in the global outlook. This called for proactive policies in the advanced economies, especially Europe and Japan, and forceful action to open markets and liberalize world trade.

Crisis prevention and management

Reforms implemented by the IMF following the Asian crisis, Köhler said, were helping to make the international financial system more resilient. It was nonetheless clear that "the IMF needed to work even harder to put crisis prevention at the heart of its activities." The IMF's top priority for the coming months should be further work on early warning systems, to combine quantitative indicators with judgment from the field and the markets and bring this to bear in the IMF's deliberations and policy advice. He noted that the new International Capital Markets Department and the ongoing dialogue with private sector representatives through the Capital Markets Consultative Group would help improve the IMF's expertise and judgment on capital market issues and strengthen crisis prevention and management.

He also stressed the importance of making the IMF's Contingent Credit Lines operational, as a way to encourage preemptive policy reforms and...