The IMF has embarked on a comprehensive review of its strategic direction, aimed at elaborating a shared vision of its future role and priorities. The IMFC took up a preliminary report on a major aspect of that review—the preparation of a medium-term strategy to guide the Fund’s work program and budget—and looked forward to reaching conclusions by the September 2005 Annual Meetings and further reflection on longer-term issues.
The strategic review, which IMF Managing Director Rodrigo de Rato called for in 2004 and has been led by First Deputy Managing Director Anne Krueger, took as its natural starting point the directive of the 1944 Bretton Woods conference that the IMF promote macroeconomic and financial stability, nationally and internationally, and encourage international monetary cooperation to address shared challenges. “By providing these global public goods, the Fund contributes to the achievement of sustained economic growth,” the Managing Director’s report to the IMFC said.
Evolution as an imperative
The IMF’s Executive Directors noted in their March 2005 discussion of the medium-term strategy, global developments, the changing needs of a diverse membership, and the lessons of experience call for continued evolution “with surveillance, technical assistance, and lending remaining the principal vehicles for carrying out the Fund’s purposes.”
The Managing Director’s report to the IMFC highlighted the key role played by effective underlying institutions, the need to focus IMF operations on “issues that matter most for macroeconomic and financial stability,” and the growing importance of regional and global surveillance, financial sector surveillance, and capital account developments. The report also underscored the continued vital role of IMF lending and the Fund’s active engagement in promoting stability and sustained growth, as well as helping reduce world poverty and achieve the Millennium Development Goals. The report also reaffirmed the IMF’s commitment to making the most effective use of the resources entrusted to the IMF by its membership.
While the IMF’s original mandate remains “as important as ever,” the challenge going forward, the IMFC said, is to “enhance the IMF’s effectiveness in pursuing its core objectives, while continuing to adapt to changing global economic circumstances. This would ensure that the IMF remains relevant for all its members, which would further foster the coherence, credibility, and evenhandedness of the IMF.”
IMFC calls for further work
To help shape the IMF’s strategic direction, the IMFC called for further work on a number of emerging priorities:
- Enhancing the effectiveness and impact of surveillance. Building on the conclusions of the 2004 Biennial Review, surveillance should become more focused and selective in analyzing issues in an evenhanded way across the membership. Regional and global surveillance should play an increasing role and be better integrated with country surveillance.
- Work on financial sectors and international capital markets should be strengthened further to reduce vulnerabilities and promote financial stability. This work, including financial sector assessments, should be more fully integrated into surveillance and other activities. This should be complemented by advice to members on ways to improve access to international capital markets and on orderly capital account liberalization.
- Lending. The IMF’s financing should be “selective and anchored in strong country ownership and institutional frameworks, putting members firmly on the road to external viability.” The Committee looked forward to further reflection on how the needs of members could be met and whether new instruments or revisions to existing facilities are required.
- Role in low-income countries. The IMF has a critical role to play in helping low-income countries reduce poverty and lay the macroeconomic foundations for strong, sustainable growth. Efforts should continue to adapt the IMF’s activities and instruments to the special circumstances of poor countries based on strong cooperation with the World Bank and clarity of responsibilities.
- Meeting the highest internal standards. Effective use of its members’ resources requires that the IMF meet the highest standards of internal management, control, auditing, and governance. This will require further deepening of budget reforms, additional work on the IMF’s finances and financial structure, efficient deployment of resources to reflect priorities, and further work on risk management and control, and personnel management systems.
- Safeguarding and enhancing the IMF’s effectiveness and credibility. All IMF members must have adequate voice and participation in the institution, and the distribution of its quotas—which in part determine voting power and the potential scale of Fund lending, in total and among countries—should reflect developments in the world economy.