IMF Managing Director Rodrigo de Rato visited Australia and New Zealand June 13-16 to review global and regional economic issues and exchange views with the authorities on the IMF’s medium-term strategy. In a speech at the National Press Club in Canberra, de Rato said that although the global economy was doing well, downside risks, including from rising oil prices and global imbalances, had increased. A disorderly adjustment of the imbalances could lead to an economic downturn and global financial market disruptions that, de Rato noted, could seriously affect Asian emerging markets, which depend heavily on exports, and Australia, with its open trading economy.
IMF evaluation office urged to sharpen its focus
An external assessment has credited the Independent Evaluation Office (IEO) with serving “the IMF well” but encourages it to do more to “avert the tendencies, pressures, and practices that may push it in the direction of becoming bureaucratized, routinized, and marginalized.”
The IEO was created in 2001 to enhance the Fund’s learning culture and bolster its external credibility through independent evaluations of IMF effectiveness. Asked to gauge how well these objectives have been met, a panel of outside experts, headed by former IMF Executive Director for the United States Karin Lissakers, consulted with country officials, academics, and nongovernmental organizations, as well as the IMF’s staff, management, and Executive Board.
The IMF’s Executive Board concurred with the panel’s major findings, notably that the IEO enjoyed strong support among its stakeholders, facilitated governance and oversight by the IMF’s Board, and was widely seen as acting independently. The Board also supported the recommendation that the IEO take steps to sharpen its focus and be more strategic to bolster its usefulness and relevance.
Among the panel’s other recommendations were that the IEO
make greater use of “strong outside personalities with limited exposure to the Fund” to ensure a fresh view on topics and add value to the already extensive internal reviews;
follow up more systematically on IEO recommendations and monitor implementation; and
completely overhaul dissemination and outreach activities—particularly in developing country and emerging market economies where the Fund’s role is most contentious.
For information, please see the full text of the report on the IMF’s website (www.imf.org/external/np/pp/eng/2006/032906.pdf)
There is increasing agreement on the policies needed to reduce global imbalances, he said, including fiscal adjustment and measures to stimulate private saving in the United States, further exchange rate appreciation and measures to stimulate domestic demand in some countries in emerging Asia, and structural reforms in Europe and Japan to stimulate demand and boost productivity.
The Fund can also help, de Rato said, “because we are a global institution with a global constituency, because we are engaging with all governments in the world on a regular basis.” One proposal under the Fund’s medium-term strategy, he noted, is to “engage in multilateral consultations on issues of global or regional significance that will allow the Fund to help countries think collectively and decide collectively.” The first such consultation, focusing on narrowing global payments imbalances while maintaining robust growth, will bring together China, the Euro Area, Japan, Saudi Arabia, and the United States.
Another challenge, de Rato said, is the risk of volatile capital flows and financial contagion, to which economies around the world, including in Asia, must reduce their vulnerability. For that reason, the IMF is developing an instrument to provide financing to emerging market countries that have strong fundamentals but are still vulnerable to shocks.
De Rato also discussed how to ensure a fair voice for all members and quotas that reflect the evolving weight of countries in the global economy. He expressed his appreciation for the role that Australia, as chair of the Group of 20 developed and emerging market economies, is playing in advancing reform of the IMF.
In Canberra, de Rato met with Prime Minister John Howard, Treasurer Peter Costello, Minister for Foreign Affairs Alexander Downer, opposition Finance Spokesperson Wayne Swan, Deputy Governor of the Reserve Bank of Australia Glenn Stevens, and other senior officials, as well as members of the academic and business communities.
De Rato then traveled to New Zealand to meet with the authorities about global and regional economic issues. In a speech delivered in Wellington, he noted that increased trade had long been a cornerstone of growth for the global economy. But he said that time was running out on the Doha Round of multilateral trade talks and that failure to reach agreement would be very damaging. He therefore urged “all parties to look beyond narrow defensive interests and demonstrate their willingness to negotiate a substantive agreement in the time that remains”