By Arun Kumar, IANS,
Washington : India has asked the International Monetary Fund (IMF) to refocus and strengthen its traditional surveillance and lending functions as part of efforts to resolve the global financial crisis with the spotlight on important bigger countries.
“The twin crises – in the financial markets and the commodity price increases – bring to the fore the role of the Fund,” Finance Minister P. Chidambaram told the International Monetary and Financial Committee Meeting here Saturday.
Noting that the Fund’s role, particularly in the financial crisis, has been perceived as peripheral, he said it should be unambiguously tasked with the mandate of providing the global public good of financial stability.
In the absence of the minister who has cancelled his trip, his statement was read out by Reserve Bank of India governor D. Subbarao, who is now leading the Indian delegation at the World Bank-Fund meetings as also at the meeting of the Group of 20 major economies.
Suggesting that IMF may be best suited to play the role of the conductor in organising orchestrating efforts to resolve the crisis of global proportions, he said: “As a first step, the Fund’s response should be refocusing and strengthening the Fund’s traditional surveillance and lending functions.
“Exchange rates are important in the Fund’s surveillance but financial sector stability, the orderly flow of capital, and the linkages between the real economy and the financial sector are equally critical if not more important issues,” the Indian delegate said.
Urging the Fund to adopt “a more wholesome, balanced and priority-driven approach to surveillance”, he said: “I reiterate the need for greater focus on systemically important countries, since developments in such countries tend to impact all other countries, particularly smaller ones.”
Chidambaram also suggested a clear division of labour between the Fund and other international financial institutions (IFIs) avoiding overlaps in financing mandates and development of appropriate instruments that would appeal to different types of member-countries.
“The usefulness of a contingent credit line as an instrument of crisis prevention tailored for emerging market economies undertaking reforms has been well recognized and work on this aspect needs to be expedited,” he said.
“A review of the Fund’s lending function should also take note of the resource position of the Fund, he said noting that since the Eleventh Review of quotas in 1998 there has been no general increase in quotas.
“The issue of governance continues to be critical to the legitimacy, credibility and effectiveness of the Fund,” the Indian delegate said describing “continuance of the process of realignment of quotas and voice” as the most crucial issue.
India, he said, supported the proposed three-pronged process – work based on the Independent Evaluation Office (IEO) report; the recommendations expected from the Trevor Manuel Committee of Eminent Persons; and the inputs from civil society.