IMF seeks talks to steer global soft landing

The International Monetary Fund said yesterday that it would shortly begin consultations between the world's leading economic powers over a strategy to tackle imbalances in the world economy.

The move is part of the IMF's adoption of the new role of global economic policeman as anxieties have grown about the size of the United States current-account deficit compared with large surpluses in other countries, notably China. The IMF's managing director, Rodrigo de Rato, said the first multilateral consultation would bring together the US, China, the Eurozone, Japan and Saudi Arabia.

"These economies are either ones with large current account surpluses or deficits, or they represent a large share of global output," said Mr de Rato. "Their cooperative action can play a major role in the orderly unwinding of these imbalances and in sustaining global growth as savings, consumption and investment patterns adjust."

The consultations, first mooted in April at the IMF-World Bank spring meetings, are a result of the biggest shake-up the IMF has seen in 40 years, as world economic leaders have become concerned that a rapid and disorderly unwinding, possibly involving a slump in the dollar, could cause global economic damage.

The emergence of China and India as significant economic powers has rendered the traditional forum for global economic discussions - the Group of Seven leading industrial economies - increasingly unrepresentative.

The recent turbulence in financial markets, which has seen the dollar fall sharply, has also heightened concerns in finance ministries around the world that the unwinding may now be under way.

In its biggest structural change since the break-up of the Bretton Woods system of fixed exchange rates in the early 1970s, the IMF was given a mandate to conduct multilateral surveillance of the global economy and to suggest steps that the leading nations should take in concert to ensure better balanced growth.

The surveillance unit will be modelled on the Bank of England, with guaranteed independence from political interference and an annual remit to look at the linkages and spillovers between monetary policy, fiscal policy, exchange rates and financial sector issues in the main IMF member countries.