Addressing the Treasury Select Committee in the House of Commons, London, last week, the Managing Director of the International Monetary Fund confirmed that the IMF is in the *”process of change”*.
The IMF was created to help restore and sustain the benefits of global integration, by promoting openness, trust, and international cooperation. It remains deeply committed to being a part of a process to promote a concerted and collaborative effort by the entire international community to make globalisation more inclusive, and to seek a better balancing of the risks and benefits. Mr. Horst Kohler said the Fund has learned from experience, however, that the reform of the international financial architecture has meant some reforms of its own.
Important results already seen include:
– a near revolution in the transparency of the IMF, and in the release of economic and financial data by member countries;
– more effective surveillance and technical assistance, used as vehicles for crisis prevention;
– engagement, with the World Bank, in a systematic assessment of the banking and finance sectors, including supervisory systems and mechanisms for risk assessment and management;
– implemention of a program for better surveillance of offshore banking centres, and contribution to international effort to combat money laundering and the financing of terrorism.
Additionally, the IMF is working on a comprehensive concept to establish “rules of the game” for the global economy through universally accepted standards and codes, such as those for sound monetary and fiscal policy, the efficient supervision of financial sectors, and good corporate governance.
The Managing Director noted that the improvements in the IMF’s capacities for crisis prevention and management will be crucial for sustaining global growth. Effort in this area has focused on two main areas: improving the quality of the IMF’s analysis and policy advice, and enhancing its impact.
Other factors essential to growth include sound fiscal and monetary policies and structural reform. *”In this context, there also must be confidence that the international environment will hold opportunities for countries committed to reform”*, he said.
Trade also is crucial for growth. There is no example of a developing country experiencing rapid growth without strong integration through trade into the world economy, according to Mr. Kohler.
Sound institutions and good governance have an indispensable role for sustained growth and financial stability, and individual countries must ensure that such conditions exist. *”To resolve homegrown problems, no external advice, however sound, and no amount of outside money can substitute for self-responsibility and political cohesion in a society”*, said Mr. Kohler.
**International Financial Architecture**
Addressing a Central Bank Governors’ Symposium at the Bank of England Conference Centre the following day, Mr. Kohler said the reform of the international financial architecture also is a work in progress.
Over the past year, the international financial system has shown remarkable resiliency in the face of a sharp slowdown in global economic growth, a fundamental reassessment of the technology and telecommunications sectors, and the terrorist attacks on the United States. The IMF Managing Director credited decisive policy action by the US and other industrial countries with this positioning, referencing the collaborative approach by IMF members to strengthen the global economy. He noted, however, that efforts have been assisted particularly by the coordinated actions by central banks, supervisors, and private financial institutions to safeguard the international financial and payments system in the immediate aftermath of the September 11 attacks.