The report—the result of a year-long strategic review launched by de Rato—was prompted by a desire for critical self-reflection, at the time of the IMF’s 60th anniversary and in the face of three important developments. There was a sense that the challenges of the past decade had pulled the Fund in too many new directions from its core responsibilities of guarding international monetary stability and financing temporary balance of payments problems. There was an awareness that additional mandates had made it difficult to allocate resources effectively and to stay ahead of emerging challenges. And there was the question of whether the Fund was prepared to meet current and prospective challenges, such as tackling today’s unprecedented global payments imbalances and responding to possible capital account crises.
How reform might look
Given the IMF’s macroeconomic mandate, helping countries come to grips with globalization would mean:
Making surveillance more effective. There is a need for deeper analysis of the longer-term aspects of globalization. Among these issues are the benefits, imbalances, and fragilities caused by cross-border movements of goods, people, and capital; and the ways in which institutions and policies can be developed to allow countries, especially low-income ones, to benefit from global flows. Also, country surveillance should focus more sharply on core macroeconomic issues, while identifying globalization challenges and drawing synergies from global and regional surveillance.
Adapting effectively to needs of member countries. In the case of advanced and systemically important economies, particularly, IMF policy advice needs to be better tailored to local circumstances, and country assessments need to be better integrated with global surveillance. Regarding emerging market economies, the report proposes strengthening the IMF’s work on crisis prevention and crisis resolution, including deepening its knowledge of the issues surrounding capital account liberalization. On the IMF’s involvement with low-income countries, the report recommends a sharper focus on promoting macroeconomic stability, and enabling countries to absorb scaled-up aid and take advantage of globalized trade and finance. It also proposes developing more flexible instruments to serve the different needs of individual low-income countries, facilitating progress on the Millennium Development Goals, and streamlining work procedures to free up resources.
Building institutions and capacity. Globalization has added to the push for strong institutions, and increased the importance of technical assistance and training to helping countries put in place the economic institutions crucial to growth and macroeconomic stability. The report proposes strengthening the alignment of technical assistance with evolving Fund priorities across regions, countries, and functional areas, and continuing to enhance fiscal transparency and governance.
Prioritizing work. With the IMF’s interest earnings from its large loans of recent years receding, it must set priorities in the framework of a medium-term budget. The report suggests that this will entail reforms affecting expenditures and income, and thus the organizational structure of the institution, staff compensation, and work procedures.
Addressing the issue of voice and representation. Fair weight and voice in the IMF’s decision making for all member countries are crucial to the IMF’s legitimacy. The current allocation of voting power puts this at risk (see box below).
The report urges resolving these issues during the Fund’s Thirteenth General Review of Quotas, which will be concluded in January 2008.