I.M.F. favours new Bretton Woods Pact for financial stability

Washington, Nov 10 (PTI) International Monetary Fund
(I.M.F.) has sought support of G-20 for a new Bretton Woods
Agreements, a reformed global financial architecture, to deal
with the current turmoil and prevent its recurrence.

"There have been numerous calls in recent months for a
'new Bretton Woods Agreement', which I strongly endorse,"
I.M.F. Chief Dominique Strauss-Kahn wrote to heads of G 20
countries including Indian Prime Minister Manmohan Singh ahead
of the summit here later this week.

Singh, who would be attending the summit called by the
U.S. President George Bush, too had said last week, "we will
seek reform of the international financial institutions, and
improve regulation and supervision, to prevent recurrence of
such crisis."

Following a conference of delegates from 44 nations
gathered at Bretton Woods, New Hampshire in July 1944,
multilateral institutions I.M.F. and the World Bank were set
up to deal with the post second World War economic problems.

With the world undergoing a severe financial meltdown
triggered by the U.S. sub-prime crisis, the need for new
Bretton Woods Agreement has gained ground.

Strauss-Kahn letter further said I.M.F. will draw policy
lessons from the current crisis and recommend policy responses
to restore confidence and stability.

Meanwhile, the recently concluded G-20 Ministerial
meet in Brazil called for the restructuring the the global
financial architecture.

The ministerial declaration said, "institutions must
be comprehensively reformed so that they can more adequately
reflect changing economic weights in the world economy and be
more responsive to future challenges."

India was represented by Finance Minister P. Chidambaram
and R.B.I. Deputy Governor Rakesh Mohan at the ministerial
meeting which did the ground work for the Washington Summit.

I.M.F., which has recently come out with a gloomy
forecast of world economic growth, is likely to present a
fresh report on the global scenario at the summit on November
15.

The Fund in its latest update has said, the world
economic growth rate would slip from 5 percent in 2007 to 3.7
percent in 2008 and further dip to 2.2 percent next year.

Similarly, the global trade growth rate, which has
implications for the emerging economies like India and China
will nosedive from a high of 9.4 percent in 2006 to 4.6
percent in the current year and and 2.1 percent in 2009.

Pointing out that the design of financial regulation
requires a re-think Strauss-Kahn in the letter said, "the
crisis has underlined the importance of having its ultimate
implementation by national authorities subject to surveillance
by a body or network of institutions alert to a systemic
implications across financial instruments, markets, and
countries."

He also emphasised the need for bringing together
international and national expertise to work out an early
warning system to detect impending danger to the world
economy.

There is a need for a representative group of the key
policy makers of the world who could agree on consistent
approach to deal with the crisis and follow up the action at
national and multilateral levels, he said. PTI D.P.