Strauss-Kahn faces IMF reform mountain

Dominique Strauss-Kahn, the next head of the International Monetary Fund, faces the daunting task of redefining a 185-nation institution increasingly seen as irrelevant.
The Frenchman won, as expected, the IMF executive board's "consensus" nod on Friday, setting the business-friendly socialist on track to lead the IMF at a critical juncture for its survival.
The 58-year-old former French finance minister and presidential candidate pledged to immediately get down to work on reforms at the IMF when he takes office as managing director on November 1.
"I am determined to pursue without delay the reforms needed for the IMF to make financial stability, serve the international community, while fostering growth and employment," the European Union's candidate said in a statement.
He will succeed Rodrigo Rato of Spain, the shortest-serving managing director in IMF history. Rato, who took office in May 2004, surprisingly announced in late June he was stepping down in October for personal reasons.
Strauss-Kahn has promised to fulfill "at least" a five-year mandate to carry through reforms to redefine the IMF and resolve a financial crisis due to a steep decline in the demand for loans, whose interest payments help pay for operations.
"The Fund is an essential organ of global governance facing twin challenges: a crisis of relevance and a crisis of legitimacy," said Edwin Truman, a senior fellow at the Peterson Institute for International Economics.
The Frenchman casts himself as a "consensus-builder" for a six-decade-old institution mired in the past, still dominated by the United States and Europe, and out of touch with today's realities of rising economic powers like China, India and Brazil, analysts say.
"I don't want to be the candidate from the North against the South or from the wealthy against the poor," he told the board in an interview last week, otherwise the Fund would be "doomed to fail."
He will have his work cut out for him, analysts said.
Strauss-Kahn will take office "at a time that is probably the most challenging that the IMF has had in its 60-year history," said Desmond Lachman, resident fellow at the American Entreprise Institute, a conservative think tank.
"The IMF simply has not changed with the times, in terms of either its voting rights of members or their representation at the IMF board," said Lachman. He noted that rapidly growing major countries are "grossly under-represented at the IMF."
The IMF's mission to bail out countries in crisis has been eclipsed by the newfound riches of former clients in the 1990s, such as Russia, Indonesia, South Korea, Argentina and Mexico, many of which have paid off their IMF debt.
These countries "have improved their fundamentals, built up enormous arsenals of international reserves for rainy days and established very good contacts with the private market, so in some sense the IMF is redundant as a lender," Lachman said.
Andrew Crockett, the president of JP Morgan Chase International and former head of the Bank for International Settlements, agreed.
"The decision making which used to be largely in the hands of governments has passed substantially into the hands of the market," Crockett said.
"The IMF is no longer sole and preeminent but has to see itself as part of a much broader ecosystem of institutions affecting finance," he said.
Timothy Adams, a former undersecretary of the Treasury for international affairs, hailed a recent IMF reform updating its foreign-exchange surveillance.
But, he said, "the key point now is implementation and people are watching." US lawmakers who accuse China of unfairly manipulating its currency to gain trade advantages expect the IMF to act to resolve the issue.
The IMF in recent years has searched for new missions for its some 2,700 employees, including efforts to help poor countries, with little effect.