CALL FOR IMF REFORMS TO MITIGATE FUTURE FINANCIAL CRISIS

KUALA LUMPUR, April 26 (Bernama) -- The International Monetary Fund (IMF)
should put in place the reforms needed to prevent and mitigate the effects of
future financial crises.

In making the call, Second Finance Minister Ahmad Husni Hanadzlah
said this should be done in a manner to meet individual members' needs while
advancing its work in addressing future risks to global stability.

He said this at the 21st International Monetary and Financial Committee
Meeting and 81st World Bank Development Committee Meeting which was held in
Washington, US, on April 24 and 25, 2010.

The minister was representing the South-East Asia voting group on behalf of
the 10 Asean member countries.

Husni said for multilateral surveillance, the proposal for the IMF to
undertake a more systemic perspective to surveillance merited consideration,
given that risks were easily and rapidly transmitted from one country to another
through the extensive linkages that exist globally.

"Nonetheless, the fund should articulate a clear strategy that learns from
its past experiences, including the lessons from the failed multilateral
consultations and surveillance decisions as well as lessons from this crisis,"
he said.

The IMF, he added, should also carve out its own niche vis-à-vis other
multilateral institutions to avoid duplication.

Husni said in the area of financial system oversight, the IMF should enhance
its international financial surveillance capabilities as it did not have the
expertise to be the agency in safeguarding financial stability or to be a global
regulator.

"On oversight of capital account issues, we do not find it necessary to
explicitly include capital account issues as part of the remit of the fund's
surveillance as such issues have always been part of bilateral consultations
with members," he said.

Maintaining an implicit role for the IMF would also better position it as a
confidential advisor, Husni said.

"The fund should recognise that there is a role for three tiers of buffers
in an effective and comprehensive global safety net against macroeconomic and
financial shocks in regards to reserves held by individual countries, regional
arrangements and global arrangements," he said.

"All three have different comparative advantages and should be viewed as
mutually complementary," he added.

Husni said the IMF should also look into mechanisms that may remove or
substantially mitigate the stigma associated with the utilisation of fund
facilities by member countries.

"The importance of the recently approved concessional lending instruments
and financing framework for low-income countries cannot be over-emphasised as
these instruments and frameworks can play growth-enabling roles," he said.

The minister said countries have varying capacities to deal with capital
flows, reflecting differences in the depth and maturity of the respective
members' financial systems and the efficiency of its financial intermediaries.

"In some small open economies where financial markets are still in the
process of developing or deepening, a central bank's participation to smooth out
fluctuations in the foreign exchange market can be a part of a broader strategy
to maintain stability," he said.

Husni said reserve accumulation may be the result of actions taken to
maintain orderly financial market conditions in the face of large, volatile and
possibly speculative short-term capital flows, and not solely the result of
precautionary purposes or exchange rate targeting.

"In line with the expansion in the fund's mandate and the intensified need
of members for assistance in the post-crisis period, we urge the IMF to unwind
the resource constraints imposed by the downsizing exercise and to significantly
broaden the resource envelope for technical assistance and the provision of
training," he said.

-- BERNAMA