The IMF, threatened with redundancy, wants to carve out a new role for itself as global economic policeman but Asian nations oppose any move by the institution to meddle in their affairs.
In the 1990s, the IMF was the linchpin of efforts to resolve global financial crises -- a role that earned it much criticism in Asia, Latin America and Africa for its bitter free market medicine.
Now, with no major crisis to manage, the Fund wants to enhance its role in financial surveillance, notably by focusing on the spillover effects of one country's policies on another.
This approach is strongly supported by US officials pressing for more forceful IMF action on China's exchange rate regime, which they argue gives Chinese goods an unfair advantage on export markets.
"Reforming the IMF's governance structure will not suffice. In revitalizing the IMF, we must also improve the Fund's effectiveness," US Treasury Secretary Henry Paulson told the IMF steering committee.
"This includes considering the consistency of exchange rate policies with the international system, and investigating misaligned currencies regardless of intent," he said.
But Asian economic heavyweights including China, Japan and India have expressed caution about the IMF's hopes of playing a more active role in monitoring exchange rates and trade imbalances.
The head of the Chinese central bank, Zhou Xiaochuan (
"Surveillance over exchange rates should focus on whether the adopted exchange rate regime is appropriate and consistent with a member's macroeconomic policies rather than on the exchange rate level," he said.
Japan, which is a major stakeholder in the IMF, also expressed reservations about an enhanced surveillance role.
"Efforts should be made not to hasten the discussions, which could lead to focusing too narrowly on specific issues or specific countries, thereby sending incorrect signals to the market," said Bank of Japan governor Toshihiko Fukui.
"The board should discuss this issue from the viewpoint of securing a consistency between exchange rate policies and other domestic economic policies, and not in the narrow context of attributing the global imbalance to a specific country's or region's exchange rate policies," he said.
Many Asian nations remain wary of the IMF because of the harsh medicine handed out to cure the ills of the 1997 financial crisis and have even talked of setting up their own Asian Monetary Fund instead.
Asian nations have built up large foreign currency reserves to protect against possible future crises while pressing ahead with regional initiatives like a currency swap arrangement launched in 2000.
Suspicious of the IMF, they have also reduced their IMF borrowings from a peak of US$17.8 billion in 1997 to US$300 million last year.
"The main issues of contention in Fund surveillance remain focused on how to improve its `even-handedness' and reduce its `intrusiveness,'" Indian Finance Minister Palaniappan Chidambaram said.
"Given the sensitivity of exchange rates for emerging markets, it would be desirable to keep the exchange rate assessment internal and continue with the Fund's role as a confidential adviser," he added.
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