Brown unveils major IMF shake-up

The Chancellor, who chairs the IMF's policy committee, said the fund would institute a new surveillance system to highlight the impact one country's policies had on other nations and the global economy.

The move came at the end of a week that saw oil prices hit a new record, world trade talks move closer to collapse, and talks between the presidents of the United States and China end without any solid outcome.

It followed a stern warning by the IMF's economists that world leaders had only a small window of opportunity to tackle threats to the global economy from oil prices, the record US trade deficit and the rise in protectionism.

Speaking at the IMF's Washington headquarters on Saturday night, Mr Brown said the new strategy for the IMF, which was established 60 years ago at the post-war Bretton Woods conference, had won a consensus of all 184 country members.

"This is not simply the IMF accepting responsibility for multilateral surveillance. This is about individual economies of the world ... accepting that we have responsibilities to each other and that they have to be addressed."

He said it was a time of "profound change" thanks to globalisation and of risk from high and volatile oil prices and the dangers of protectionism. "Faced with this challenge members of the committee decided that 2006 would be a year of reform for the global economy and to make the IMF more fit for purpose and address the challenges that are quite different from 1945 when the IMF was created."

The medium-term strategy drawn up by the IMF's managing director, Rodrigo de Rato, and approved by the committee, will lead to a wholesale reform of the institution including; a new focus on surveillance of multilateral issues and the spillovers and linkages between countries or groups; greater independence of the IMF's surveillance work in exchange for more direct accountability; an ad hoc revision of voting shares to give representation to small countries; and the launch of a review of the whole voting structure of the IMF that could see China and other Asia nations vastly increase their voice at the world table at the expense of Europe.

Experts believe one of the first issues to be addressed will be links between record current deficits in the US, massive surpluses in Asia and oil-producing countries, and China's currency peg with the dollar.

Asked how this would work in practice, Mr de Rato said: "This is a system by which ... the authority of the fund and the consultation process are able to discuss and implement analysis and decisions with relevant countries related to spillover and linkages."

There was fresh evidence of a new attitude to global imbalances as China said it was adopting further measures to expand domestic demand, encourage consumption, open its markets and "improve" the exchange rate regime.

Zhou Xiaochuan, governor of the People's Bank of China said the reforms meant its currency could "probably" begin to appreciate a bit more quickly. "Chinese economic reform always follows the philosophy of gradualism (but) probably it can be a little bit faster."

Meanwhile, Mr de Rato said the IMFC had given him a clear mandate to propose changes to the voting shares of some countries, including some emerging market economies, by September. His proposal would give ad hoc increases to a small number of countries like China, South Korea and Mexico. Other nations that may also qualify include Malaysia, Thailand and Singapore, which will host the annual meetings in September where Mr de Rato said he would publish "concrete proposals".

This could be the most significant change to the IMF since 1971, when the Bretton Woods agreement that obliged countries to fix their exchange rates to gold was abandoned.

Observers noted last week marked the 60th anniversary of the death of John Maynard Keynes, the British economist seen as the architect of Bretton Woods.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?