INTERNATIONAL. The International Monetary Fund is evolving into a 'central clearing house' that will help manage the global economy and ensure major economies coordinate policies to avoid crises, the head of the its policy-steering committee said on Monday.

Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the International Monetary and Financial Committee, told Reuters that IMF member countries had agreed on Sunday that the Fund's role needs to be altered to reflect new realities.

The steering committee on Sunday said the IMF's mandate should "cover the full range of macroeconomic and financial sector policies that bear on global stability."

Some even see the IMF developing into something like a global central bank, but Boutros-Ghali quickly dismissed that suggestion, saying: "That is too strong of a word."

"The IMF will have the role of a central clearing house for information, for liquidity, for coordination," he said in an interview. "All of this has to happen in a central location and the IMF is the natural candidate for it."

Just a year ago the IMF was battling to explain its relevance in a world that often turned a deaf ear to its economic policy advice, but the global financial crisis has forced hard-hit countries to turn to it for financial help.

Boutros-Ghali said the IMF's response to the crisis has restored some of the confidence it lost during previous crises, when it pressed unpopular policies upon countries that needed loans.

The IMF now extends loans with fewer strings attached, and it has developed new lending instruments, including one for emerging market economies.

It has also taken on new roles. It is working with the Financial Stability Board, the policy coordinating arm of the G20 major powers, on an early warning system to avoid crises and been asked by the G20 to provide analysis of whether their policies are consistent with more sustainable global growth.
But looming large is the thorny issue of shifting IMF voting power from established powers -- the United States and European nations -- toward emerging economic heavyweights, like China, to reflect their growing economic might.

Boutros-Ghali said that change won't be easy because some countries feared losing too much power. IMF member countries have agreed to conclude talks on voting power changes by January 2011.

"We need to sit and talk," he said. "We have to sit and look at how it's going to be done. It's a complicated process and I would not try and pre-judge the outcome right now."

The G20 has agreed to a voting power shift of at least 5 percent to under-represented countries, but emerging economies are pushing for no less than 7 percent.

Boutros-Ghali noted that the World Bank and IMF were established in 1944 after three years of negotiations.

"We are trying to revamp this structure and we need to do it in much shorter time," he said.

As the IMF considers ways to remake itself, he said it should continue helping countries with balance of payments problems, but should also become a "reserve pool" for countries so they don't feel the need to accumulate huge currency stockpiles to self-insure against future crises.

IMF Managing Director Dominique Strauss-Kahn on Friday called for a huge boost in the lender's resources -- perhaps $1 trillion or more -- to let developing countries know they could count on the IMF to help them in a crisis.

In the short-term, Boutros-Ghali said the IMF was sufficiently funded to deal with the current crisis.

"Right now the IMF has the resources it needs. It is able and ready to help any country that would have problems due to the present crisis," he added.

"Resources are now a second-order of magnitude problem. First order of magnitude is restructuring the institution."

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