Also issues global economic risk outlook

The International Monetary Fund (IMF) has outlined a number of key reforms to help tackle current global economic challenges. It also issued its most recent risk outlook on the global economy and financial markets.

The announcements came at a meeting of the IMF’s Financial Committee on April 12. The Committee stressed that the current global economic challenges required strong action and close cooperation. It announced reforms to the Fund’s core mandate in order to achieve this.

The IMF said growth prospects for 2008 and 2009 had deteriorated. Risks to the outlook included the still unfolding events in financial markets and from the potential worsening of housing and credit cycles. Inflationary risks—notably from higher food, energy, and other commodity prices—have also risen, said the Fund.

The Committee welcomed the actions taken by the central banks of the advanced economies to provide liquidity support to ease strains in interbank markets, and called for continued vigilance. It said prompt actions by large financial institutions to disclose losses and repair balance sheets would contribute to restoring confidence.

Commenting on developing countries, it noted that a number faced a sharp rise in food and energy prices, which would have a particularly strong impact on the poorest segments of the population.

Sovereign Wealth Funds (SWFs) are becoming increasingly important players in the international monetary and financial system, offering various economic benefits, including a stabilizing influence on financial markets, but also posing several challenges for policymakers, said the Committee. It emphasized the need to work on best practices for countries receiving SWF investments.

IMF reforms and policy agenda

The Committee emphasized the importance of strengthening the Fund's financial surveillance role, and its capability to identify risks in the future.

The IMF reforms included a review of members’ quota shares and other changes to the income model aimed at placing the Fund on a sustainable financial footing.

The Fund also committed to sharpening its surveillance of the risks to the financial sector.