The International Monetary Fund won new powers to police the world economy after its 184 member countries endorsed a new framework to monitor how the economic policies of one country may be affecting others.
At a meeting in Washington, the countries, represented by finance ministers or central bank governors, also agreed that some emerging economies needed more say in IMF decision-making. More weight needed to be given to China and other Asian countries, to reflect their greater economic weight, it was agreed.
Changes in this area could see greater say within the organisation being given to a number of European countries, including Ireland. German finance minister Peer Steinbrueck called for "equal treatment", saying some European countries - such as Germany - were also underrepresented in their quotas. Countries such as Ireland and Spain are also considered to be underrepresented.
"The IMF should be more able to address global questions with multilateral surveillance," said Britain's chancellor of the exchequer, Gordon Brown.
The International Monetary and Financial Committee, or IMFC, said IMF surveillance would focus on spillovers and links between countries' economic policies and reaffirm their monetary, fiscal and exchange-rate frameworks.
IMF managing director Rodrigo Rato will have the authority to bring nations together on an ad hoc basis to thrash out any economic misalignments based on IMF analyses.
Officials said this would create a new forum that better reflected the rise of Asia in the global economy and could possibly replace bodies like the Group of Seven (G7) industrial countries, which some say can no longer call all the shots.
One of the problems facing the G7 is that major economic players like China are not part of the club, even though it is the fourth-largest economy in the world.
The United States has pressured the IMF to broaden its surveillance to include the exchange rates of emerging countries, as Washington also pushes Beijing to loosen its tightly managed currency.
The IMF made the case that such a move was also critical to coordinating economic policies and preventing the unruly unwinding of huge global imbalances in trade and investment flows that could spark a world recession.
Member countries welcomed efforts to enhance monitoring of exchange rates but most said they were hesitant about the IMF publishing analyses on the theoretical fair value of currency rates because it was market-sensitive.
China, however, said this did not mean the IMF should interfere in how countries manage their exchange rates.
An IMF proposal already circulated among members would give ad hoc increases to countries like China, South Korea, Mexico and Turkey. Other nations that could also qualify include Malaysia, Thailand and Singapore.But tensions remain between industrial and developing countries over how to re-allocate voting power beyond initial increases in the quotas for some emerging nations.
- (Reuters)
