Text of Managing Director’s Press Club speech

• Pages: 258-260

Page 258

The full text is available on the IMF’s website: www.imf.org.

The outlook for the world economy is the best we have seen in over a decade. The IMF staff expects the global economy this year as a whole to grow by about 4#/4 percent. But there should be no complacency. Many difficult problems remain to be solved. Ten years after the end of the Cold War, I see more opportunities than ever to make life better in this world.

IMF reform

I believe that the calls for a reform of the IMF are justified. Why must the IMF change?

First, because the environment in which it operates has changed dramatically. International financial markets have seen unprecedented growth in volume and sophistication, especially during the past decade. Private capital flows are now a major source for promoting growth and productivity, but they can also be a source of abrupt volatility and crisis. To contain the latter and to promote the former is the issue at stake.

Second, of course, we need to draw lessons from experience. The IMF has made mistakes. In particular, the IMF was not attentive enough to the changes in global financial markets and their repercussions on exchange rate systems and domestic financial sectors. And the IMF has—like everyone—underestimated the importance of institution building, which needs time and requires, crucially, ownership by the societies affected.

With this in mind, I felt it important to hear firsthand about the concerns and aspirations of the membership of the IMF. During the last three months, I have visited 15 developing and emerging market countries in Latin America, Asia, and Africa. Let me share a few of the impressions and views that I formed during my travels.

• The market economy and democracy are clearly in advance throughout the world. A fair judgment of the IMF should acknowledge that the institution has contributed to this fundamental trend in the world. And there is continued commitment to stay the course of reform and structural change.

• Overall, there is a broad recognition that there are serious homemade problems, including disregard for the rule of law, corruption, and armed conflicts, and that the main responsibility for tackling these problems lies with the countries themselves.

• Despite a lot of critical questions about the IMF, on the whole, there was no doubt that the emerging market and developing countries value the advice and support of the IMF and that they strongly wish to continue using it.

• Developing countries want the IMF to focus on its traditional functions and areas of responsibility—that is, to promote macroeconomic stability and growth. They endorse the view that stability fosters growth, and that growth is indispensable to reduce poverty. They would like to see an effective cooperation between the two Bretton Woods institutions, but also a division of labor, with the World Bank taking the lead in the direct fight against poverty.

Undeniably, globalization has provided enormous opportunities for growth, investment, and transfer of know-how and...