Prasarn Trairatvorakul: Global challenges, global solutions – IMFC issues Statement by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the International Monetary and Financial Committee (IMFC) Twenty-Third Meeting, International Monetary Fund, Washington DC, 16 April 2011. * * * On behalf of Brunei Darussalam, Cambodia, Fiji, Indonesia, Lao P.D.R., Malaysia, Myanmar, Nepal, Philippines, Singapore, Thailand, Tonga and Vietnam. Introduction 1. We thank Mr. Youssef Boutros-Ghali for his contributions to the IMFC, especially his leadership in completing the 2010 Quota and Governance reform. We congratulate Minister Tharman Shanmugaratnam on his appointment as the new Chairman. With his rich experience in understanding the interests of advanced and emerging market countries, we have full confidence that Minister Tharman will be able to make significant progress in fostering a global consensus on many challenging policy issues. 2. Although the global recovery has gained strength since the last IMFC meeting, its prospect remains fragile as several downside risks continue to prevail. Having been successful in coordinating policies to contain the catastrophic damage from the global financial crisis, policymakers are now facing a more difficult task in forging a consensus on multilateral commitments for countries to take into account the impact of their policies on other members and the international monetary system (IMS). Such an agreement will not be easy to reach against the current backdrop of a multi-speed recovery and asymmetry in domestic policy requirements.
Given their sometimes rapid and dynamic nature and the difficulty in differentiating between temporary and structural flows, it is difficult to envisage a determinate response path at the outset. Hence, the policy toolkit ought to entail a range of measures, not precluding any one option ex ante, with the flexibility to make adjustments over time. Recent experiences of emerging market economies – including several members of our region – attest to the capacity for policymakers to respond in a pragmatic and timely rather than strictly rules-based and sequential manner. 6. In this connection, the Fund’s framework for managing inflows should serve only as an empirical study on country experiences in using capital flow management measures. It should not become an obligation for member countries as was the case with the 2007 Decision on exchange rate surveillance; otherwise the Fund will risk straining its relations with the membership. We also note that the above framework is part of a broader reform agenda on capital flows, which would entail examining both push and pull factors, as well as both source and recipient dimensions of flows. Moreover, the longer-term solution to managing capital inflows lies in developing deeper and broader financial markets, which would enhance absorptive capacity and facilitate efficient use of capital. We therefore call on the Fund to further study this aspect to help members develop their capital markets. 7.