Conclusion IMF seminar

Date 03/12/2007

Today, Monday 3 December, the Riksbank held a seminar on the IMF’s future challenges. As of the beginning of next year and two years ahead, Sweden will chair the Nordic-Baltic Constituency. The seminar showed that there is still considerable interest in the work of the IMF in Sweden. An institution with 185 member countries is a unique channel for global cooperation and something that Sweden wishes to safeguard. The IMF does, however, face a number of challenges in the coming years. Sweden as a member country must contribute to ensure that the ongoing reform work will lead to a strengthening of the legitimacy of the IMF and to greater efficiency, so that the organisation can continue to promote global financial stability in a suitable manner. 

 

The country that holds the chair in the Nordic-Baltic Constituency may also hold the director’s position, which the Constituency shares on the Fund’s Executive Board. Jens Henriksson who will hold this position as of the beginning of next year took part in the seminar and spoke of his expectations and priorities regarding the work in the Fund.

 

Jens Henriksson commented:

“It is a privilege to be able to represent the Nordic and Baltic countries and exciting to be given the opportunity to be active in the IMF during the ongoing review of the Fund’s roll, its function and working methods.”
Murilo Portugal, one of the deputy Managing Directors of the Fund, gave his view of the ongoing reform agenda at the IMF. In his speech Mr Murilo touched on the history of the Fund and the experience of adapting to a changing world. He also spoke of the main topics of discussion in the ongoing review of the IMF's work, namely,

• Representation at the IMF (often called “quota and voice”).
  
  Member countries’ influence is being reviewed with a view to getting the countries’ influence in the Fund to better correspond to their weight in the global economy. In particular, certain rapidly growing emerging economies are currently under-represented.
  
• New challenges face the IMF’s monitoring in the light of the recent financial turmoil. 
  
  Mr Portugal said that the turmoil has led to an increased awareness of the Fund’s crisis prevention work. He also spoke of the challenge of implementing in an efficient manner the decision taken by member countries in the summer about the IMF’s monitoring of individual member countries’ economies.  This decision means that the Fund’s monitoring will, to a greater extent, focus on countries’ external stability and developments in their exchange rates. This is a controversial issue for many member countries and the difficulty in defining, for instance, an “equilibrium rate” leads to interpretation problems.
  
• The Fund’s role in low-wage countries.
  
  Mr Portugal considers that the Fund still has an important role to play in these countries. He also pointed out the importance of effective cooperation with the Fund’s sister organisation, the World Bank.
  
• The Fund’s finances.
  
  These have weakened as fewer countries wish to borrow from the IMF. The Fund is now looking at other potential sources of income and is also reviewing the possibilities to cut its expenditure in order to improve the budget situation.

Finance Minister Anders Borg spoke about the IMF’s measures to promote long-term healthy economic development. He pointed out the importance of long-term structural reform and its significance for financial stability. According to Mr Borg, the Fund has a unique importance as a sounding board to comment, assess and evaluate national economic policy. This is especially the case as virtually all countries are members of the IMF.

 
Based on his own experiences, partly from his previous appointment at the IMF, partly as the present Governor of the Riksbank, Stefan Ingves spoke of the Riksbank’s priorities and thoughts about the Fund’s future work. He confirmed the view that greater financial integration and the increasing complexity of financial instruments mean that the Fund's function as global supervisor remains extremely important. He welcomed the Fund’s work with regional monitoring of the financial area.

As regards the Fund’s finances, Mr Ingves saw this as a shared responsibility between the Fund, which must be cost-effective and prioritise its expert function, and the member countries which must be selective with the tasks they assign the Fund. He also spoke of the importance of effective cooperation in Europe as regards IMF issues.

It is important that Sweden, Europe and the EU start making their voices heard more in the Fund. Together, the EU countries hold more than a third of the votes in the Board. This influence can be better deployed.

In conclusion, Stefan Ingves stressed that the issue of representation in the Fund is an important topic of discussion, not least for the legitimacy of the Fund. However, he felt that at times it was difficult to move forward. Sweden is pursuing the line that the emerging economies should have a greater share of the quota, which at the same time means that the industrialised countries must cut their share. It is also important to maintain influence for the low-wage countries, which therefore should not “help to pay” for the quota increase for the emerging economies.