The International Monetary Fund should no longer act as the “gendarme” of the global economy and must reform itself to restore its relevance and legitimacy, according to Dominique Strauss-Kahn, the incoming managing director.
In his first press conference since being confirmed in the post, Mr Strauss-Kahn described the IMF as a “priceless institution” that had a vital role to play in a globalised world. “We do not need less multilateralism, we need more multilateralism. We do not need less IMF, we need more IMF,” the former French finance minister said in Paris.
However, Mr Strauss-Kahn said the IMF must become more responsive to the concerns of poorer countries and more representative of their views if it is to survive as an institution. He said he had heard a consistent message about the IMF from world leaders on his 60,000-mile trip to garner support for his candidacy. “They are both critical and hopeful,” he said.
Mr Strauss-Kahn said that emerging countries, particularly in Asia and Latin America, were right to be “distrustful” of past IMF policies that had imposed very strict rules on crisis-stricken countries in the developing world. But he said that world leaders had also expressed their belief in the importance of multilateral organisations, such as the IMF, so long as they could be reformed.
“I defined myself as the candidate for reform. Now I am the managing director for reform,” he said.
Mr Strauss-Kahn, who will take up his post in Washington at the beginning of next month, said voting weights in the organisation should be rebalanced with big emerging economies, including China, India, Brazil, South Africa, and Mexico, gaining greater representation at the expense of Europeans. He said he would also focus on reducing and refocusing the IMF’s bureaucracy to address its most important challenges.
In an interview with Le Monde newspaper, Mr Strauss-Kahn said the IMF should work more closely with other multilateral organisations such as the World Bank, the United Nations Development Programme and the World Trade Organisation to promote a more coherent vision of development. He rejected the idea that the IMF’s mission was to lend to emerging countries while the World Bank provided money to poor countries.
He said the IMF should take more account of a country’s longer term development paying as much attention to its demography and agriculture as its budget and balance of payments. “We must finish with the image of the World Bank as the ‘good mother’ and the IMF as the ‘big stick’,” he said.
Commenting on the turmoil in financial markets, Mr Strauss-Kahn said it had produced some “bad and sad” results, such as the run on the Northern Rock bank in the UK. “Nevertheless I think that the situation is now under control even if I would not say it is solved. Everything that could be done has been done,” he said.
He also suggested the IMF should promote itself as a forum for global economic debates.
In spite of criticisms of the “carve-up” of top jobs between the US and Europe at the World Bank and the IMF, Mr Strauss-Kahn was strongly endorsed as managing director by IMF shareholders on Friday.