By Arun Kumar, IANS,
Washington : International Monetary Fund (IMF) member countries including India have agreed to expand and deepen its surveillance of the global economy to identify largest systematic risks to avert future crisis.
The IMF will produce a new report investigating how financial policy decisions in countries around the globe affect others, the 187- nation institution’s policy making International Monetary and Finance Committee said Saturday.
The new IMF report will mesh in with Group of 20 economies’ decision Friday to monitor world’s seven largest economies, including India, to highlight and suggest corrective steps to rectify imbalances that could pose risks to the global economy.
“Global challenges demand global solutions. The need for global cooperation in solving our most pressing problems of today is vital,” said leader of the Indian Delegation, Reserve Bank of India governor Dr. Duvvuri Subbarao.
“The crisis has taught us that no country can be an island, and that economic and financial disruptions anywhere can cause ripples, if not waves, everywhere,” he said warning “uncoordinated responses will lead to worse outcomes for everyone.”
Noting that complex global problems facing the world today are “not amenable to easy solutions and many of them require significant, and often painful adjustments at the national level,” Subbarao said.
“At the same time, the global crisis has shown that the global economy, as an entity, is more important than ever,” he said underlining the central role of IMF “in reforms so that it continues to spearhead and weave together the fabric of international cooperation.”
“There are significant vulnerabilities still in the global financial and economic system,” said Tharman Shanmugaratnam, the finance minister of Singapore and chairman of the panel.
“That reflects the legacy of an international monetary system that is still not in what we consider satisfactory shape. On top of that, we have new vulnerabilities and new risk,” he said, mentioning the Middle East, Japan and higher commodity prices.
“We need to strengthen the linkage between surveillance of the financial and macro-economic dimensions of the world economy,” he said.
The IMF is trying to learn from the 2008 crisis and become better at understanding developing risks in the world economy, said a communique of the governing body.
The committee also said authorities need to implement existing international agreements to better regulate the global financial system and cautioned that excessive risks remain in place more than two years after the financial crisis.
The global economic recovery “remains vulnerable” despite showing some signs of sustained momentum,” it said warning that some international banks continue to pose system risks to the international economy.
The IMF board also asked members to push forward with a new framework for dealing with capital flows saying a “comprehensive and balanced approach” to deal with capital flows is needed.
The committee separately said the IMF will chalk out a “criteria-based path” to include other currencies in the basket that makes up the special drawing right (SDR), IMF’s lending unit.
(Arun Kumar can be contacted at [email protected])