[stop-imf] Bank of England's BoE's King calls for bolder, more ruthless IMF

[Robert Weissman]

    BoE chief urges radical shake-up of IMF
 >By Chris Giles in London and Andrew Balls in Washington
>Published: February 20 2006 20:37 | Last updated: February 20 2006 20:37
 >>

Mervyn King, of the Bank of England, warned on Monday that the
International Monetary Fund could =93slip into obscurity=94 without radical
reforms, making his own proposals to restructure the institution.

Speaking in India, Mr King proposed granting the IMF=92s managing director
and staff more independence and power to monitor and criticise
individual countries=92 economic policies. He suggested removing the
day-to-day duties of the IMF=92s executive board, which is controlled by
member countries.

Mr King=92s speech marked a radical departure from the incremental reforms
proposed by Rodrigo Rato, IMF managing director, and many senior
policymakers. His speech is likely to gain private approval from many
within the IMF. In national capitals, however, there is likely to be
resistance to any proposals which might dilute the influence that
representation at the Fund in Washington is considered to bring.

Criticising the year-long debate leading up to the IMF=92s annual meeting
in Singapore later this year over individual country=92s voting powers on
the board, Mr King said: =93Even if an agreement is reached, what would be
the purpose if the Fund remained unreformed?=94

Instead, Mr King called for the international community to create a new
fund that would pass judgment on the effects of one country=92s economic
policies on others.

At the moment, he made said, this process was hamstrung by the IMF=92s
staff having insufficient independence to publish their views on
economic policies with clarity, particularly when addressing
=93divergences between stated objectives [of countries] and actual
policies at the national level=94.

Mr King proposed replacing the existing board, which has permanent
delegations in Washington, with a non-resident board that would meet six
or eight times a year in a supervisory capacity. This, he said, would
stop the =93expensive micro-management=94 of existing arrangements.

Commenting on the IMF=92s loss of its role as a lender of last resort =96
now that private capital flows dwarf official lending and emerging
countries have built huge stocks of international reserves =96 Mr King
revealed his long-standing frustrations at the regular meetings of
international financial policymakers.

=93We will have only ourselves to blame if we fail to face up to the
challenge and simply allow the IMF to evolve through a series of ever
more bland communiqu=E9s and meaningless statements,=94 he said.

Mr Rato last September released a personal review of the IMF=92s
medium-term strategy. It said the IMF needed to focus on its core
mission, including improving surveillance and crisis prevention. Mr Rato
also called for governance reform, to give Asian countries more
representation on the board.

 >

 >
 >

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AFX News Limited
BoE's King calls for bolder, more ruthless IMF
02.20.2006, 06:45 AM





LONDON (AFX) - Bank of England governor Mervyn King today called on the
International Monetary Fund to be bolder in its role at the centre of
global monetary economics and more ruthless in its dealings with member
contries.

'The world needs a strong and effective IMF to make us conscious of our
responsibilities as members of the international economic system, and to
provide a clear and cogent analysis of the challenges ahead,' he said in
a speech in New Delhi, India.

King said the IMF needs greater focus, independence and legitimacy,
adding that IMF member countries must feel that the ownership of the
fund is shared and that all have a voice.

And, while reform of the IMF is needed, the body has important roles to
play, he stressed.

The IMF can provide a forum which improves knowledge and understanding
of various countries' objectives and policy reaction functions may lead
to more compatible policies. Additionally, it can provide the public
with 'a dispassionate and independent' analysis of the spill-over
effects of one country's policies on others, he added.

While the IMF cannot have an independent remit for global monetary
stability, its role should be to support national policy makers by
providing expert analysis about external risks to their domestic
monetary policy objectives, King said.

The IMF's role should indirectly support global monetary stability
through the powers of analysis, persuasion and, in (economist John
Maynard) Keynes own favourite words, 'ruthless truth-telling', he added.

Sadly however, he noted that 'ruthless truth-telling' did not conjure up
many memories of any international meetings King himself had attended.

'But unless the IMF has the self-confidence to play that role, its
deliberations and statements will carry little weight. The Fund requires
an independent, respected and clear voice,' King stressed.

He called on the IMF to have more open discussions about the
international monetary system and for deliberations not to focus solely
on a few important countries.

For this to happen, only meetings with a small number of participants
can encourage the level of frankness needed, he argued.

'All member countries will need to accept that the big players in the
international monetary game must be able to meet at a relatively small
table. But the membership of the top table must change with
circumstances -- the group of big players is no longer an exclusive
group of rich countries. Low and middle income countries can now affect
the global economy,' he said.

'India and China have to be at the table,' he pointed out.

sivakumar.sithraputhran@afxnews.com

ss/nes