Select Committee on Treasury Ninth Report

1  Introduction

1. On 13 December 2005, we announced the start of an inquiry into the International Monetary Fund (IMF), and its role in globalisation. After requesting written evidence, we held three oral evidence sessions. The first, in January 2006, was with non-governmental organisations (NGOs) and selected academic experts; the second, in April 2006, with the Governor of the Bank of England, Mervyn King; and the final session in May 2006 was with the Chancellor of the Exchequer, the Rt Hon. Gordon Brown. We also undertook a visit to the United States in February 2006, in the course of which we met both representatives of the World Bank, including President Wolfowitz of the World Bank, and representatives of the IMF, including Ms Anne Krueger, first deputy Managing Director of the IMF. We are grateful to all those who gave evidence or otherwise assisted with our inquiry, especially those we met on our visit to the United States.

2. This is a time of change for the International Monetary Fund (IMF). Since its foundation as one of the 1940s Bretton Woods institutions, the Fund has seen enormous growth in the world economy. The organisation of the world economy has also changed, from an era of almost global fixed exchange rates, to one where most major industrialised countries now float their exchange rates. Changes in technology and communications have given rise to a perceived increase in 'globalising' trends. The IMF sits as the central institution of the international financial system, and therefore at the heart of the world economy.

3. In the light of this, our inquiry has proved to be extremely timely. After our evidence session with experts and NGOs, the Spring meetings of the IMF occurred. Afterwards, in our next evidence session, the Governor of the Bank of England remarked to the Committee that he thought "the events last weekend [at the Spring meetings] were a very significant departure from earlier versions of the strategic review and the energy which the Fund was demonstrating".[1] They also marked a change in the outlined position of the Fund, as it begins its own process of reform to make itself more relevant to the environment in which it finds itself. The IMF published 'The Managing Director's Report on Implementing the Fund's Medium-Term Strategy' in April 2006, which superseded the original document on which the inquiry had been taking evidence, 'The Managing Director's report on the Fund's medium-term strategy'. As well as this, the International Monetary and Financial Committee (IMFC) produced a communiqué which also aimed to address policy recommendations for the IMF going forward. At the conclusion of the IMFC meeting, the Chancellor of the Exchequer referred to the upcoming annual meeting of the IMF in Singapore as a "reform summit".[2] Our report therefore comes at a time when the UK Government has an excellent opportunity in which to mould the debate on the IMF's future.

4. Our report deals first with defining a purpose for the Fund and, with this purpose in mind, we deal in turn with the governance of the Fund, its surveillance and analysis functions, its lending, its finances and the UK Government report on its dealings with the IMF. We conclude with the overall findings of our work.

1   Q 90 Back

2   Transcript of a Press Conference by the Chancellor of the Exchequer and others, International Monetary Fund, Washington, D.C., 22 April 2006, Back

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Prepared 13 July 2006