Update: IMF Managing Director Dominique Strauss-Kahn delivered speeches in both Singapore and Beijing. In Singapore he spoke of a leadership role for Asia, while in Beijing he addressed how China is leading the world out of recession and the need for further reform of China’s dynamic economy.
By Anoop Singh
(Version in 日本語)
Asia’s standing and influence continues to grow and the IMF is working with the region to help it meet its full economic potential as it recovers from the global crisis. In mid-November, the Managing Director of the IMF, Dominique Strauss-Kahn, begins a six-day trip to Asia. First he’s in Singapore attending the 16th Asia-Pacific Economic Cooperation (APEC) Finance Ministers’ Meeting, and then goes on to China November 16-17, one of the region’s most dynamic economies.
In Singapore, the Managing Director co-chairs a roundtable discussion on economic policy challenges facing the region and will deliver a lecture on the role of Asia in reshaping the post-crisis global economy. In China, he will discuss with the authorities their policy response to the global crisis and ask senior government officials about their outlook for the Chinese and world economies.
The visit is another sign of the importance which the IMF attaches to its relationship with Asia as the region leads the world away from crisis toward global recovery. It will also provide Asia and the IMF an opportunity to deepen their engagement.
Asia has contributed much to the global recovery and contributed significant financial resources to the Fund to help it assist other members to cope with the crisis.
- First, as highlighted in the October 2009 Asia and Pacific Regional Economic Outlook, that was recently launched in Seoul and Tokyo, the powerful stimulus measures that many countries took to counteract the crisis have helped the region lead the global recovery.
- There is growing recognition in many countries for the need to reorient the drivers of medium term growth. As Premier Wen Jiaobao recently indicated, China has “made vigorous efforts to stimulate consumption and make domestic demand, particularly consumer spending, the primary driver of economic growth”. The Managing Director of the Monetary Authority of Singapore, Heng Swee Keat, recently took the view that “to sustain growth, Asian economies with big domestic markets will need to continue with structural reforms to boost domestic demand…. Measures to encourage new investments in the corporate sector and in public infrastructure, as well as in education and healthcare, will be necessary for most Asian emerging economies in order to realize their growth potential”. Greater reliance on domestic sources of growth will, in time, offset weak export demand from advanced economies at the center of the crisis.
- Asian countries have played a critical and catalytic role in boosting the IMF’s resources. In the early days of the crisis, Japan provided $100 billion to bolster the IMF’s lendable resources during the economic crisis. This commitment— the single-largest supplemental financing contribution by an IMF member country—has helped catalyze other contributions to the Fund and reflects Japan’s continuing global economic leadership. Through the New Arrangement to Borrow and Note Purchase Agreements, Asia has raised its contribution to the Fund by $178 billion, including a pledge of $ 50 billion from China, $10 billion each from India and Korea, and $2 billion from Singapore.
- More recently, the Reserve Bank of India paid $6.7 billion for 200 metric tons of gold from the IMF—about half the total sales volume of 403.3 metric tons that was approved by the IMF’s Executive Board in September 2009. This transaction will help toward putting the Fund’s finances on a sound long-term footing and, by helping the Fund finance its subsidy account, enable it to significantly increase concessional lending to the poorest countries.
The IMF, for its part, has continued to expand ways to hear views from the region. A notable development will be the inaugural meeting later this week in Singapore of a new, advisory group of eminent representatives from across Asia who will be hosted by the Managing Director. The Fund will seek the views of this group on the economic issues facing Asia and how the IMF can best help in meeting those challenges.
Indeed, we are already adapting to meet the needs of our Asian members.
- Take the example of the IMF’s global role through the lens of one of its key responsibilities: surveillance. Using the knowledge we garner from our near-universal membership, we have brought more of a cross-country perspective to our analysis, both within and outside our region during this critical period of global financial crisis when timely information on what other policymakers were doing was critical. This has given regional policymakers access to a wider global perspective and the thinking of economic teams across the world. This improvement has already been acknowledged by some Asian voices, such as Singapore’s Finance Minister Tharman Shanmugaratnam [see YouTube video below].
- In addition, the IMF has redesigned its lending facilities to better match the conditions in borrowing countries. For example, we extended an exceptional access loan to Mongolia earlier this year, and so averted a potential balance of payments crises that would have demanded disastrous cuts in social services In contrast, that country’s financial markets have now stabilized, capital outflows have been reversed, and inflation has fallen.
Through all these different channels, Asia is rising to meet the responsibilities of its growing economic weight and that trend is clearly illustrated in its closer and stronger relationship with the IMF.