From efficiency to budget discipline: US calls for reforming IMF

The IMF must design programmes with the right policy reforms, the US treasury secretary said

The US on Saturday called for the International Monetary Fund (IMF) to improve its operational efficiency and serve as a model on budget discipline and efficient use of limited resources.

"The IMF should find ways to further enhance its operational efficiency," US Treasury Secretary Steven Mnuchin told a gathering of world finance ministers and head of central bankers in Washington.

As a public institution just like the member institutions it monitors and advises the IMF should serve as a model on budget discipline and efficient use of limited resources, he said in his address to the annual meeting of the IMF and World Bank.

"Achieving this goal will necessarily entail tough choices, potentially with regard to management and staff salaries and benefits," he said.

Asserting that the IMF plays an important role in the international monetary system through the promotion of economic stability and global growth, Mnuchin said to best execute this role, the IMF must deliver on its core mandate.

It can do so by encouraging stable exchange rates that reflect underlying economic fundamentals, promoting sound public financial management and a market-oriented regulatory framework, and pressing for independent central banks to pursue transparent monetary policy, he said.

As the IMF moves into the post-global financial crisis period, Mnuchin urged it to structure its lending programmes to prioritise reforms that drive private sector-led economic growth.

In too many countries, a large public sector crowds out the private sector. In others, a burdensome and inefficient tax system or excessive regulatory barriers fail to create effective incentives for private sector capital and labour mobilisation, the US treasury secretary said.

The IMF must design programmes with the right policy reforms, in the right sequence, to support the private sector as the growth engine, he told the gathering.

"In this vein, we strongly approve of IMF efforts to reassess how the institution addresses corruption in member countries. Corruption at all levels of government wastes public resources and often deters private sector investment and growth," he said.

Observing that the IMF also has a key role to play in promoting stronger debt management processes, particularly in low income countries, he welcomed its work to strengthen the low-income debt sustainability framework.

The framework's effectiveness, however, depends crucially on accurate and complete debt data, he said.

"The IMF should press for timely, accurate, and comprehensive debt information from borrowers and creditors, including private sector and emerging market debt to improve transparency and reduce the negative outcomes of opaque lending," Mnuchin said.