The International Monetary Fund is evolving into a central clearing house that will help manage the global economy, the head of the IMF's policy-steering committee said Monday as nations debated the lender's future role.
Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the International Monetary and Financial Committee, told Reuters that IMF member countries were in agreement that the Fund's role needs to be reshaped to reflect new realities.
The steering committee Sunday said the IMF's mandate should cover the full range of macroeconomic and financial sector policies that bear on global stability.
Some even see the IMF developing into something akin to a global central bank, but Boutros-Ghali quickly dismissed that suggestion, saying: That is too strong of a word.
The IMF will have the role of a central clearing house for information, for liquidity, for coordination, he said in an interview. All of this has to happen in a central location and the IMF is the natural candidate for it.
Just a year ago the IMF was battling to explain its relevance in a world that often turned a deaf ear to its economic policy advice, but the global financial crisis has forced hard-hit countries to turn to it for financial help.
The Group of 30, a group of prominent bankers, policymakers and economists, Monday said the IMF should aim for sweeping reforms and it urged nations to act quickly before the urgency to change faded as the financial crisis eased.
The G30 suggested the Fund create a new governing council to oversee the IMF's executive board and to structure itself in a way that gave big emerging powers more say. This could mean greater political involvement for the Group of 20 leading developed and emerging economic powers.
Boutros-Ghali said the IMF's response to the crisis had restored some of the confidence it lost during previous crises, when it pressed unpopular policies onto countries.
The IMF now extends loans with fewer strings attached, and has developed new lending instruments, including one healthy emerging market economies can tap in times of crisis.
It has also taken on new roles. It is working with the Financial Stability Board, the policy coordinating arm of the G20 major powers, on an early warning system to avoid future crises and has been asked by the G20 to analyze whether their policies are consistent with more sustainable global growth.
Brazilian Finance Minister Guido Mantega said Sunday he would support the IMF offering liquidity and currency swaps, as central banks do.
He argued it would eliminate the need some countries feel to build up large currency reserves as bulwarks against bad times, as some large emerging economies, including Brazil and China, have done in recent years.
In a similar vein, IMF Managing Director Dominique Strauss-Kahn called Friday for a large increase in the IMF's resources -- about $1 trillion or more -- so it can play a credible lender of last resort role for economies around the world.
He said such an insurance fund would bring about better balance in the global economy by encouraging nations to use export earnings for domestic investment, rather than reserve building.
But looming large in the remaking of the IMF is the thorny issue of shifting voting power from established powers -- the United States and European nations -- toward emerging powers, like China, to reflect their rising economic might.
Boutros-Ghali said that change won't be easy because some countries feared losing too much power. IMF member countries have agreed to conclude talks on voting power by January 2011.
We need to sit and talk, he said. It's a complicated process and I would not try and prejudge the outcome.
The G20 has agreed to a voting power shift of at least 5 percent from over-represented to under-represented countries, but emerging economies are pushing for no less than 7 percent.
As the IMF considers ways to remake itself, he said it should also become a reserve pool for countries to discourage them from building unnecessarily large reserves.
China, meanwhile, has pushed for an overhaul of the IMF's voting system with automatic adjustments to ensure fast-growing economies gain an increasingly large voice over time.
(Reporting by Lesley Wroughton; Editing by Tim Ahmann)