Indian finance minister Pranab Mukherjee today said the governance structure of the International Monetary Fund and the World Bank needs major overhaul for the two sister institutions to reflect a changed global economy.
The fiscal constraints of the global financial crisis is being felt more by the developing nations - in maintaining their investment in infrastructure, health and education - and needed increased funding, Mukherjee told the IMF-World Bank meeting in Istanbul.
He said the lingering effects of the crisis on the poor may continue for many years. The medium-term imperatives are returning output to pre-crisis levels, recovering jobs, and to continue the fight against poverty, he added.
If the Fund and the Bank are to play their legitimate roles in the post-crisis world, Mukherjee said, the two cannot emerge from the crisis unchanged. "They have to enhance their legitimacy to perform their expanded roles and mandates effectively. Far reaching changes to the governance structure of the IFIs are needed to reflect the changing dynamics of the global economy."
He said the IMF and the World Bank must recognise the role of developing countries as drivers of future global economic growth and speed up overdue changes in their governance structure if the institutions are to keep their legitimacy, credibility and effectiveness.
While the coordination demonstrated at the global level has generated hope of recovery, he said the recovery still appears to be unsteady and long-drawn, with growth in employment lagging behind. "Maintaining policy stimulus is crucial for anchoring the recovery. Balancing the stimulus against the risks of inflation and threats to fiscal viability is a key short term challenge," he said, adding that the timing and sequencing of exit strategies also assume importance.