core sector communique

IMF Managing Director Dominique Strauss-Kahn Welcomes G-20 Leaders' Seoul Action Plan

November 12, 2010

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), today welcomed the actions announced by the Group of 20 Leaders at their summit in Seoul, Korea aimed at strengthening the international policy framework to help sustain the global economic recovery.

“Cohesion and cooperation defined the G-20 during the crisis. This allowed decisive policy action to help avert a second Great Depression. Now the challenge is to secure the recovery and to create the growth and jobs that the world needs. We all recognize that much remains to be done, but the Seoul Action Plan is a step in the right direction.”

Mr. Strauss-Kahn welcomed the Leaders’ agreement to continue with the Mutual Assessment Process (MAP) and –through the Seoul Action plan– to set out country-specific commitments in key policy areas. In this context, Leaders called on the IMF, along with other international organizations, to advise on “indicative guidelines” to help identify large imbalances that require preventive and corrective actions to be taken.

Based on these guidelines, the Fund will assess progress toward external sustainability as well as the global consistency of national economic policies. Mr. Strauss-Kahn added that the modernization of the Fund’s surveillance mandate and instruments—including new country-specific spillover reports on the wider impact of systemic economies’ policies—would support this effort.

Mr. Strauss-Kahn also pointed out that the G-20 Leaders in Seoul called upon the IMF to deepen its work on all aspects of the international monetary system, including capital flow volatility. Strengthening the global financial safety is a key part of this agenda. In this context, the G-20 welcomed the recent strengthening of the IMF’s lending toolkit including through enhancement of the Flexible Credit Line (FCL) and creation of the Precautionary Credit Line, as well as possible synchronized FCLs to support multiple countries affected by a common shock.

“We will continue to explore ways to refine the global framework needed to cope with shocks of a systemic nature, including through collaboration with Regional Financing Arrangements,” he said.

Mr. Strauss-Kahn underlined that while much has been done to achieve far-reaching reform of the global banking system through the Basel III accord, “much yet remains to be done to implement these measures and ensure that the new financial regulatory framework will be complemented by more effective supervision and resolution frameworks.” In this regard, the G-20 Leaders’ welcomed the mandatory Financial Sector Assessment Program (FSAP) being undertaken by the IMF and World Bank for countries with systemically important financial sectors.

The Leaders also called upon the IMF and other organizations to do further work on macro-prudential policy frameworks, including tools to mitigate the impact of excessive capital flows.

Mr. Strauss-Kahn welcomed the Seoul Development Consensus for Shared Growth that sets out the G-20’s commitment to work in partnership and complement efforts to achieve the Millennium Development Goals. “We support this multi-year action plan on development that sets out concrete measures,” he said.

Finally, Mr. Strauss-Kahn welcomed the G-20 Leaders’ endorsement of recent governance changes at the IMF, including through greater representation of dynamic emerging markets and developing countries. “These quota and governance reforms will, as the G-20 recognized in Seoul, enhance the Fund’s legitimacy, credibility and effectiveness—making it an even stronger institution for promoting global financial stability and growth for all its members.”

Mr. Strauss-Kahn thanked the Government and people of Korea for the excellent arrangements for the Summit and their gracious hospitality.