The Changing Role of Imf in Asia and Global

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The Changing Role of the IMF in Asia and the Global Economy : It is an exciting time for the Fund. We are in the process of implementing a new Medium-Term Strategy, with the aim of adapting the institution to help our members deal with the challenges of 21st century globalization. These include issues like greatly increased capital flows which permit current account payments imbalances on an unprecedented scale; integrated financial markets that are both more complex and subject to more rapid change and development than in the past, and the emergence of new economic powers. These developments give rise to great opportunities but also to serious challenges. I believe that if the Fund is to remain relevant to its members, including those in Asia, both its work and its governance structure must be adapted to these new realities. 4. To set the stage, I will begin with a bit of background on the International Monetary Fund. The Fund is a unique, global institution. Almost every country in the world is a member: currently 184 countries with 98 percent of the world's population. Our tasks are to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty. 5. One of the most important functions the Fund performs is its surveillance of the international monetary system and of the global economy. By surveillance I mean both monitoring of the global economy and the Fund's discussions—consultations—with individual members on their economies. The IMF is a unique global institution, because every country's policies are assessed by an independent staff, and are subject to peer review by an Executive Board representing all of the membership. In addition, building on the analysis of individual countries, the Fund makes an objective assessment of the global economy and publishes its assessment twice a year in our World Economic Outlook. 6. At the moment, the global economy is doing well. We expect global growth to be close to 5 percent in 2006, the third consecutive year for global growth to be noticeably above the historical trend. Growth is also more broad-based than in the past: the U.S. and emerging Asia, especially China, remain the key drivers of the current global expansion, but the recoveries in Japan and the euro area are strengthening. A few months ago, we might have said that this is as good as it gets. 7. But perhaps it was too good to be true. Downside risks have clearly increased, as evidenced by increased financial market concerns. And although what we have seen so far is a fairly modest correction of previous increases in asset prices, there is evidence of heightened risk aversion, as investors reassess prospects for liquidity, inflation and growth. In the face of rising inflationary expectations and concerns that higher interest rates may choke off growth, the balancing act that central banks around the world must undertake has become more difficult. Governments can make their task easier by addressing some of the risks in the global economy, and the Fund can help them. 8. Some of the risks to the global economy are obvious—for example, high and volatile oil prices; and the small but very serious risk of an avian flu pandemic. The Fund is working with its members on these issues. To combat the risk that high and volatile oil prices will adversely affect global growth and inflation, we are encouraging sound macroeconomic management and polices that promote a more stable oil market and a better balance between supply and demand. On avian flu, we are working within our areas of expertise: helping our members to prepare business continuity plans, especially for their financial sectors, so that financial systems will continue to function properly in the event of a major public health problem. 9. But more work is needed to address a third major risk, global payments imbalances. The most obvious signs of these payments...
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