Session 2005-06, 13 July
Treasury Committee calls for IMF shake-up and stronger focus on crisis prevention and surveillance
The Treasury Select Committee today called for a major shake-up in the way the IMF goes about its internal business - including the way it deals with crisis prevention and surveillance.
Committee chairman the Rt Hon John McFall MP said the meetings this autumn of the IMF in Singapore "offer an ideal opportunity for reform" within the organisation, including the way it appoints its managing director.
And he warned: "A disorderly unwinding of global economic imbalances poses a real risk to both the United Kingdom and the world economy.
"The IMF can provide assistance in tackling these issues - but to be able to do so it must adapt as an organisation."
Mr McFall said the IMF needs to take a greater role in crisis prevention, rather than crisis resolution.
The Committee's Report recommends reforms to the governance structure of the IMF and says that this should include "an open selection process" around the appointment of its next managing director.
It states too that the quota structure of the IMF should be changed, so that there is greater representation of both low-income and emerging market economies. This should be agreed in one stage, rather than the two-step process that is currently being considered for the September 2006 meetings of the Fund.
Mr McFall said: "It is important that all stakeholders in the IMF feel that they are fairly represented, otherwise there will be little reason for them to listen to the results of the Fund's work. That is why we look to the Government to work to ensure that post-Singapore, all member states should have more input into the IMF's work.
"Reform should begin at the top, with the selection of the next managing director being a more open process in the future. The Executive Board should also be more transparent in its workings, allowing those affected by the Fund's decisions to see how those decisions were made."
The surveillance functions of the IMF will be an important part of the Fund's armoury. As such, the Committee makes recommendations to ensure the independence of surveillance from both individual member states, and any potential bias arising from the Fund's own lending programmes.
Mr McFall said: "A more focussed Fund, concentrating on undertaking independent, 'balance sheet' analysis of the international financial system, is proposed in our report. This can only help in providing a clear picture for the different member states of how their individual actions are affecting the overall state of the world's economy."
The Committee says that, occasionally, the IMF will be forced to resolve a crisis and that any lending it commits to under these circumstances should have conditionality that is both appropriate to the borrowing member state, and has regard for local democracy.
Mr McFall said: "Much of the criticism over the IMF has been due to the conditions it has required of countries in difficulty wishing to access its resources.
"In future, they should take into account both the democratic wishes and economic circumstances of the borrowing country. If these recommendations are followed, the UK Government can help move the Fund further towards fulfilling its role at the centre of the international financial system."
Mr McFall is available for comment on the report on 07730 987 802 (mobile) or 020 7219 3521 (Westminster office).
1. Committee membership is as follows: Rt Hon John McFall (Chairman), Mr Colin Breed, Jim Cousins, Angela Eagle, Mr Michael Fallon (Sub-Committee Chairman), Mr David Gauke, Ms Sally Keeble, Mr Andrew Love, Kerry McCarthy, Mr George Mudie, Mr Brooks Newmark, John Thurso, Mr Mark Todd, Peter Viggers.
2. 9th Report of the Treasury Committee, Globalisation: the role of the IMF, HC 875, will be available via the Committee's website at: www.parliament.uk/treascom.
3. Press Notice No. 52
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