Group of Seven finance ministers urge IMF to strengthen surveillance, reform lending facilities

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The IMF should seek to wean countries from their longer-term dependence on its funding and encourage them to turn more to capital markets, according to a statement issued by the Group of Seven finance ministers after their meeting in Fukuoka, Japan, on July 8. The meeting was part of the preparations for the economic summit of the Group of Eight to be held in Okinawa on July 21– 23. Discussion also focused on the impact of the information technology revolution on the global economy and finance, and steps needed to strengthen the international financial architecture, to act against abuses of the global financial system, and to reduce poverty and spur economic development.

In discussing ways to strengthen the international financial architecture, the finance ministers said in their statement that “it isPage 226 essential to continue to examine the role and functioning of the international financial institutions, in view of the changing global financial landscape, including the increasing importance of private capital markets.”

Reform of the IMF

As part of the effort to strengthen the international financial system, the Group of Seven finance ministers called for a reform of the IMF. Their recommendations seek to improve the IMF’s effectiveness in tackling financial crises while extracting it from long-term lending that could equally well be provided by the private sector. Specific recommendations include

• strengthening IMF surveillance to prevent crises;

• promoting the implementation of internationally agreed codes and standards;

• reform of IMF facilities,“with a view to encouraging countries to develop stable access to private markets and discouraging prolonged use of, and deterring inappropriate large-scale access to, IMF resources”;

• implementing the new framework for safeguards on the use of IMF resources and taking early action to strengthen post-program monitoring;

• making further progress in increasing the involvement of the private sector in program design; and

• strengthening the governance and accountability of the IMF.

The statement further calls on the IMF “to explore, in the context of the review of its facilities, appropriate uses of any resulting increase in IMF income within the existing framework of the Articles [of Agreement], with the objective of targeting support to the poorest countries.”

The finance ministers also released for...