At the helm as storms buffet all

International Monetary Fund has key role in tackling financial crises, says Lin Jianhai

Despite its much-criticized response to the 1997 Asian financial crisis, the International Monetary Fund has been evolving and has the capacity to help tackle the current global downturn and restore economic growth and jobs, IMF Secretary Lin Jianhai says.

"We have been providing policy advice, financing, and technical assistance to our 188 member countries. In all these three areas, we have the experience and capability. The IMF's comparative advantage is its global membership and the broad international experience, accumulated through years of ups and downs in the world economy," Lin says in an interview at the IMF headquarters in Washington.

In March, he became the first Chinese-born expert to take this post at the IMF, where he has worked since 1989.

About 100 Chinese are employed by the IMF, including 60 permanent staff members.

Lin is the third Chinese national to join the management ranks of international financial institutions. He follows Justin Yifu Lin, a former chief economist at the World Bank, and Zhu Min, whose current post as one of three deputy managing directors puts him in the top five of IMF officials.

Lin previously served in various senior positions in the IMF's Asia-Pacific, policy development and review, finance, and secretary's departments. Throughout his career, he has worked in many areas involving a large cross-section of countries, policies and administrative duties.

The IMF, created in 1944 and put into operation the following year, is often at the center of efforts to extinguish fires in the global financial system. Its 188 member states contribute money to a pool from which the IMF disburses loans - usually with strict conditions such as future budget cuts attached - to countries facing financial crisis.

The IMF has committed $250 billion (200 billion euros) in support of economic adjustment and reform in about 50 countries. It has also played the role of technical adviser to developing nations seeking to achieve macroeconomic stability and reduce poverty.

The Secretary's Department, which Lin oversees, has operational responsibility for the IMF's 24-member executive board. It also serves as the official contact point for all of the member countries. Lin's department also organizes the IMF's spring and annual meetings, which coincide with those of its sister institution, the World Bank. The next annual meetings will take place in Tokyo in October.

"My job is to listen to different ideas, seek common ground, and provide advice and solutions," he says.

Having learned lessons from the 1997 Asian crisis, the IMF has been playing an active and important role in helping accelerate the global economic recovery and addressing the sovereign-debt crises rippling through the eurozone, Lin believes.

"Economic phenomena are complex, influenced by economic, political, cultural and other factors. So it is difficult to predict and prevent crises. In other words, no matter what we do today, crises may happen in one form or the other."

However, "if we do a good and careful job, we will be able to extend as long as possible the interval between crises, reduce their severity, and contain their ability to afflict the global economy - the so-called spillover effects", Lin says. "Clearly, this is not easy, but we have been trying and working hard with others to address this challenging task.

"During the Asian financial crisis, people criticized the IMF for inflexible financial policies and outdated economic views, but we have been learning since then and have gained further experience."

For example, since 2008 the institution has made a priority of quickly tackling debt problems affecting Europe. Lin points out the IMF has increased overall lending, improved policy advice and technical assistance, and reformed its governance structure to better reflect countries' economic standing in the world.

A major initiative, he says, is to strengthen the IMF's financial "firewall" with additional loan money from members. Besides helping to tackle the eurozone crisis, this will support growth in emerging markets and developing countries. Because the global economy is so interconnected, instability in one part of the world can quickly disrupt other regions.

Last week in Mexico, leaders from the Group of 20 major industrialized and developing countries agreed to replenish IMF coffers with $456 billion. These additional resources will help all members at risk of succumbing to the financial crisis.

"With economic recovery still fragile and unemployment high, now is an important time for countries to take further policy measures to address remaining vulnerabilities," Lin says.

"Urgent actions are needed to tackle global challenges with collective resolve, wisdom and efforts. In other words, global challenges require global resolutions."

In terms of its own governance, the IMF expects to make good progress in how member states' quotas (financial contributions) and voting power are determined at the Tokyo meeting, he says.

That follows a statement in April from the IMF's steering body, the International Monetary and Financial Committee, that there was an urgent need to make quota changes by the time of the Tokyo meeting, to enhance the fund's "legitimacy and credibility".

Seeking to reflect the increased economic importance of emerging-market members such as China, Brazil, India and Russia in the world economy, the IMF announced in 2010 the quota and governance reform package. It includes a major realignment of quota "shares" among members and increased voting power for big developing countries.

The committee in April endorsed the adoption of a "simple and transparent" formula for determining quotas that "better reflects members' relative positions in the world economy". That seemed to acknowledge the developing countries' view that shares should be tied more closely to gross domestic product.

The IMF has said it will complete the review of its shares-allotment formula by January and the next quota review by January 2014.

When the 2012 reform takes effect, China's quota share in the IMF will increase to 6.4 percent from the current 4 percent, following the United States and Japan.

"China's economic reform has achieved remarkable results in the past 30 years," Lin says. It has brought an average 10 percent increase in output per year, and millions of people out of poverty. "However, while the economy still has potential for fast growth, it faces many challenges."

After rapid growth driven by investment and exports, China now needs to upgrade its economic structure and rely more on domestic consumption to sustain growth and prosperity, says Lin, who believes Beijing's goal of 7.5 percent growth this year is achievable.

For China, he says, the challenges are to implement restructuring policies and overcome weakened demand from other countries due to the global slowdown.

"It shows that the government pays attention to both the speed and the quality of economic growth."

tanyingzi@chinadailyusa.com

(China Daily 06/29/2012 page24)