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Carstens defends leadership bid before IMF executive board

Text by News Wires

Latest update : 2011-06-28

Mexico's central bank head Agustin Carstens auditioned for the International Monetary Fund's top job at the organisation's Washington bureau on Tuesday. His main rival, French Finance Minister Christine Lagarde, will make her case later this week.

AFP - Mexico's central bank chief Agustin Carstens pitched his bid to lead the International Monetary Fund to the IMF executive board on Tuesday, calling for increased resources.

Carstens, the emerging-market candidate vying against European rival Christine Lagarde, told the board the 187-nation IMF needs more funds from its members.

"The IMF is not all it could be," Carstens told the 24-member board, which plans to choose between the two candidates by the end of June.

"Even though financial resources available to the Fund to support member countries have been recently increased, more needs to be done."

The IMF currently has the highest resources in its history, with more than $660 billion available to lend to medium- and high-income member countries. But nearly two thirds of the money has already been borrowed by about 40 members.

Carstens called for an "adjustment of quota size," the sums provided to the IMF by member countries based on the size of their economies, which determines their share of voting rights.

In the six-decade history of the IMF, "quota resources have not kept pace with the rate of global growth, the size of world financial markets or the degree of countries' interconnectedness," he said.

Quota redistribution underway must continue "in favor of emerging and developing countries," according to Carstens.

He said consensus-building was "at the heart" of the Fund's decision-making process, but noted that "initial conditions for all countries must be fair" for it to function, including voting power that appropriately takes into account members' relative economic weights.

"To be sure, increased representation comes with increased accountability. Emerging market countries would have to fully share responsibility for promoting broad-based prosperity in the global economy," added Carstens.

When dealing with a crisis, the IMF "should lend, including in large amounts," if the problem is driven by a cash crunch.

"If, on the other hand, the debt position is unsustainable, Fund lending would only overburden the member, and would lead to the postponement of other, more effective, decisions," he said.

Under those circumstances, Carstens said "pre-emptive restructuring agreements can help countries regain debt sustainability and Fund support."

He also called for a redistribution of the board's 24 seats, of which seven are held by European Union representatives, in favor of greater representation of emerging-market and developing countries.

"Emerging market countries have been reliable partners during the last decade. Adequate voice and representation would ensure that their vast policymaking experience benefits the global community," said Carstens.

The 53-year-old economist, a former IMF director and deputy managing director, pledged that if selected he would ensure the Fund is impartial to bolster its legitimacy.

In the years before the 2008-2009 crisis, he said, "advanced economy surveillance was relatively light compared to that of other countries."

The Fund's economists should "resist the emerging-markets bias: these economies are no longer the 'weakest link,'" warned Castens.

He expressed satisfaction with the three-hour meeting as he left IMF headquarters in Washington.

"It was a fairly long meeting, very orderly, in which I was allowed to express my points of view on the Fund and the risks it faces," Carstens told reporters.

His rival Lagarde, the French finance minister, is due to meet with IMF officials Wednesday and make her case to the board Thursday.

Carstens and Lagarde, 55, a lawyer by training, made the IMF's short list of candidates to succeed managing director Dominique Strauss-Kahn, who resigned on May 18 to face sexual assault charges in New York.

Strauss-Kahn, who had been widely tipped as the Socialist contender against French President Nicolas Sarkozy in 2012 elections, has denied the charges.

Date created : 2011-06-22


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