G-20 Summit Will See World at "Crossroads," according to IMF

Sources: NYT-Struggle Over IMF Becomes Focus as Crisis Summit Nears

IMF-World Faces Crisis Crossroads at G-20 Summit, Says IMF

While the role of the IMF and of its members will be an important focus of the April 2nd Group of Twenty Summit in London, the IMF itself has an agenda for the G-20 leaders to address.  IMF Managing Director Dominique Strauss-Kahn emphasized the paradigm-shifting potential of the upcoming meeting in his recent talk with international journalists.  In the meantime, the IMF is undergoing its own “huge change” in lending practices and country representation in order to reduce the stigma attached to IMF loans.

The IMF highlighted five areas of focus that it believes must be addressed in order for the summit to be successful.  Financial sector “cleanup” must be a top priority as a healthy financial sector is key to increasing world growth.  Next, though 2009 has seen significant fiscal stimulus in many major economies, the G-20 nations must ensure that it will continue to be available in 2010.

The final three goals in the IMF agenda address the effects of the global financial crisis on emerging economies and low-income countries.  The IMF wants the G-20 nations to ensure that it has the resources to help emerging markets and low-income nations deal with the global slump in economic growth and the drop in commodities prices.  To accomplish these goals, the IMF hopes that the G-20 nations will agree to double its lending capacity to more than $500 billion.  The IMF’s so-called “war chest” has been depleted by the $50 billion in loans that it has made to nations struggling to cope with the crisis.  The United States has made increasing contributions to the IMF a key part of its agenda for the G-20 meeting, though the U.S.’s own commitment is unclear because Congress must approve it.

As earlier reported in this blog, the IMF also announced major changes in the way it makes loans and the conditions the loans require.  In the interview, Strauss-Kahn highlighted that these changes were to be followed by changes in country representation at the IMF in order to give low-income and emerging-market countries greater voice.  He expects these changes to be commenced at the G-20 summit as well, an agenda shared by China, Russia, and many other G-20 participants.

Discussion:

Will the G-20 summit have a significant impact on the global financial system?  Or are the views and goals of the participant nations now too disparate to reach any real agreement?  Is increasing the IMF’s “war chest” an important goal for the Summit?