The International Monetary Fund (IMF) board will consider
a proposal to sharpen its monitoring over the global economy,
including evaluation of the exchange rate policies of
IMF member countries had endorsed an increased role for
the fund in policing the global financial system reshaped
by trade and financial globalisation and the rise of China
and India .
The IMF board, at it''s week-end meeting, will seek to
find agreement on a revision of its so-called 1977 decision
on surveillance over exchange rate policies that guides
IMF surveillance on exchange rate policies.
IMF managing director Rodrigo Rato told a conference in
Washington on June 12 that the revision of the 1977 rule
was an opportunity for the membership to agree on the
IMF''s role. He said a major flaw of the 1977 decision
was that it said nothing about policies other than exchange
"Exchange rates are not the whole story. Balance
of payments problems can come from many sources, not just
''wrong'' exchange rates," Rato said.
"And it is not always exchange rates that need to
change. Sometimes it is domestic policies that need to
change to make an exchange rate sustainable." Rato
said it was important the IMF was regarded by all members
as a trusted advisor and that its analyses and advice
be even-handed and candid at the same time.
"The IMF must be trusted to give even-handed advice
and fair representation to all of its members," he
said, adding, "We must meet this duty in our surveillance."
Some emerging market countries have, however, urged that
the sharpened surveillance should not amount to meddling
in domestic affairs of countries and its advice should
not favor one country over another.
The IMF''s role in monitoring currencies has been thrown
into the spotlight by the dispute between the United States
and China over the value of the Chinese yuan, which US
lawmakers and businesses say is undervalued.
United States has argued that the IMF should "judge"
whether the yuan is fairly valued and should play a stronger
role in ensuring that trading nations do not manipulate
currency values to gain a trade advantage.
By revising the 1977 decision, member countries hope the
IMF will become a more effective global policeman that
will enable it to spot a financial crisis before it happens.