The Fund can provide a useful voice and a forum for advising the major economies to pursue policies that can contribute better to global economic expansion and financial stability. The Fund can play an important role in considering, from a global or systemic perspective, the exchange rate policies of its members. And the Fund plays a vital role in providing the macroeconomic policy framework that is the critical to sustaining better growth outcomes and the effectiveness of the global development assistance effort for the poorest, low-income countries. I think the Fund is reasonably close to the frontier, the sensible or achievable frontier, in these areas. Some may wish it were more effective in persuading the G-3 to avoid policies that create the risk of abrupt changes in financial market conditions or exchange rates, but it will never be decisive in this arena. And it might do more to further improve the design of macroeconomic policies and institutions in the poorest developing countries. But outside those areas, the challenges to sustained growth in per capita income lie largely in areas beyond the core competence of the IMF. In the emerging market context, in contrast, there is greater distance between the Fund of today and the achievable frontier. This is a timely and critical issue, because of the magnitude of the challenges that still confront many emerging market economies. Let me start with a broad review of the progress made over the past decade across emerging markets in reducing their vulnerability to financial crisis.
These aggregate improvements mask substantial differences across countries and a number of areas of lingering vulnerability. Let me highlight some, and then suggest some implications for how the Fund might better position itself to deal with the challenges they present. •  Some of the most daunting challenges are in the fiscal and public debt area, where a number of emerging market economies across different regions face very high, and in some cases still growing public sector debt levels. Average public debt burdens in the emerging world have risen to about 70 percent of GDP, and among countries rated single B and below, the mean rises above 80 percent. •  The challenge of managing debt burdens of this size is magnified by the fact that the debt structures in a number of countries are still quite vulnerable to foreign currency, liquidity, and interest rate risk. The substantial share of public debt denominated in foreign currency - 70 percent on average for the lowest rated group of borrowers - and the relatively short maturity of the debt stock mean that a relatively modest shock can produce a substantial increase in debt burdens, raising the amount of fiscal effort needed to keep the debt stock on a stable or declining path, and increasing the economy’s vulnerability to a crisis. •  In some countries, the fiscal trajectory is too weak to place the debt-to-GDP ratio on a sustainable path.