The International Monetary Fund’s 187 member countries called for “evenhanded surveillance” and said uncovering vulnerabilities in advanced economies was a priority, potentially a major shift for the Fund, which has traditionally tread softly on giving advice to its biggest shareholders.
An uneven pattern of world growth has led to divergent national policy responses that have fuelled global tensions as the US dollar slides and emerging market currencies soar. Sharp currency shifts have heightened the calls for rebalancing trade and fed worries that emerging markets could be at risk of asset bubbles.
The United States, which has been pressing China aggressively to let its yuan rise faster, had urged nations to give the IMF more clout to referee currency disputes.
“Further action is urgently needed to reinforce the institution’s role and effectiveness as a global body for macro-financial surveillance and policy collaboration,” the IMF’s steering committee said in a closing communique.
The United States and China both appeared to get their points across in the final communique.
Washington wanted the IMF to speak with greater “candour” in advising countries on policy, and that term appears in the statement. Beijing had stressed the need for an “evenhanded” approach, and that word is included twice.
IMF members stopped short of formally endorsing in the communique an IMF proposal that would have established a multilateral surveillance programme, an idea that drew mixed reviews from member countries.
They called on the Fund to make in-depth studies of how to better manage capital flows but postponed more concrete decisions until next year.
Eswar Prasad, a former IMF official who is now a senior fellow at the Washington-based Brookings Institu-tion, said the IMF’s enhanced surveillance idea sounded awfully familiar.
“The IMF is trying to reinvent the wheel yet again,” he said, adding that the proposals were “fancy new names for old surveillance mechanisms” and did not give the IMF any stronger authority to turn their policy advice into action.
“The major economies are each encouraging the IMF to push harder on other countries but showing no willingness to yield to the IMF any such leverage over their own policies,” he said.
While the US push was part of its focus on the value of the yuan, China wanted to ensure the Fund also focused intently on policies in the rich world, and member countries agreed.
“Stronger and even-handed surveillance to uncover vulnerabilities in large advanced economies is a priority,” the communique said. “Surveillance should also be better focused on financial stability issues and their macroeconomic linkages, and more attentive to cross-border spillovers.”
Currencies have become a hot-button issue as countries seek to solidify a shaky economic recovery, particularly in advanced economies.
