IMF member nations, acknowledging resistance from emerging markets to limits on capital controls, said rich nations' policies that spur large capital outflows that could harm other economies also need oversight.
The steering committee of the International Monetary Fund, comprised of finance officials from around the world, addressed the increasingly contentious issue as emerging markets grapple with an inflationary inflow of hot money that they blame on low interest rates in the United States and other advanced economies.
Giving due regard to country-specific circumstances and the benefits of financial integration, such an approach should encompass recommendations for both policies that give rise to outward capital flows and the management of inflows, the panel of IMF member nations said in a communiqué.
The IMF this month endorsed use of capital controls, a tool once considered anathema to its free-market philosophy, but advanced countries want to establish a framework to monitor the policies governments use, an approach emerging markets oppose.
Ironically, some of the countries that are responsible for the deepest crisis since the Great Depression and have yet to solve their own problems are eager to prescribe codes of conduct to the rest of the world, Brazilian Finance Minister Guido Mantega said, including to countries that are overburdened by the spillover effects of the policies adopted by them.
Brazil, which has one of the highest official interest rates at 11.75 percent, is among emerging economies that have taken repeated steps to try and curb large inflows of money. But the need to also combat rising inflation has complicated the problem, with central bank rate hikes designed to cool growth feeding the inflows of capital.
Brazil and others point at the U.S. Federal Reserve's zero interest rate policy, which they say leads investors to pour money into their economies in search of higher returns.
Singapore Finance Minister Tharman Shanmugaratnam, the chairman of the IMF steering committee, said the problem was not just not just an emerging market phenomenon but also a global inflation and interest rate problem.
The steering committee said the global economy was strengthening but that policy action was needed given significant risks threatening the recovery.
Credible actions are needed to accelerate progress in addressing challenges to financial stability and sovereign debt sustainability, and to ensure timely fiscal consolidation in advanced economies, it said.
It also called for further work toward widening the basket of currencies that compose the fund's accounting unit, the Special Drawing Right.
Leading world economies have been working on a plan to include the Chinese yuan in the SDR basket, but progress has been slow. That's partly because of China's policy of keeping the yuan on a tight leash. SDR currencies are supposed to be freely usable.
PUTTING FISCAL HOUSES IN ORDER
Some finance officials said ultra-loose monetary policies and rising budget deficits in the United States and other advanced countries pose a threat to the world's recovery from the worst recession since World War Two.
The fiscal situation in the advanced economies gives us great concern, and it is in this area that we see the major risks to the global economy, Russian Finance Minister Alexei Kudrin told the IMF's advisory panel.
The IMF this week noted that the U.S. budget gap was on course to hit 10.8 percent of economic output this year, tying Ireland for the highest ratio of deficit to total output among advanced economies. It urged Washington to tighten its belt.
At Saturday's meeting, U.S. Treasury Secretary Timothy Geithner said the United States was committed to fiscal reforms that will restrain spending and reduce deficits while not threatening the economic recovery.
Leaders also fretted about fiscally strapped euro zone countries and their ability to refinance their massive debts.
Fiscal authorities, especially in advanced economies, should speed up public finance consolidation, said Dutch Finance Minister Jan Kees de Jager. A strong message from the (IMF panel) on this matter would be welcome.
U.S. and other developed country leaders have long argued that emerging countries can combat inflows and price pressures by allowing their currencies to strengthen against the dollar.
China, the world's biggest exporter, has rebuffed acute U.S. pressure to let the yuan rise more rapidly, though Premier Wen Jiabao this week said the country should resort to more exchange rate flexibility to combat rapidly rising prices.
Consumer price increases accelerated in both China and India in the year to March.
Geithner called the IMF's proposed framework on capital controls a good start and called for stepped-up surveillance on monitoring exchange rates.
(Reporting by Reuters IMF/G20 team; Writing by Steven C. Johnson; Editing by Leslie Adler)