IMF must bolster powers to help prevent crises-ex-IMF chief

MANILA Oct 7 (Reuters) - The International Monetary Fund (IMF) must increase its responsibilities to include checks of financial transactions, a reform hatched during the Asian financial crisis, to help prevent a repeat of the global credit mess, a former IMF chief said on Tuesday. Michel Camdessus, IMF managing director at the time of the 1997/1998 Asian financial crisis, also said it was unlikely that the global economy would slip into recession, partly due to the strength of some Asian economies.

"I express here a certain sense of frustration, because what is needed to reform the global system is what we were proposing at the end of Asian crisis," Camdessus told reporters at the sidelines of a business forum in the Philippine capital.

"I have even recommended since 12 years ago...it was obvious we must broaden the competence and jurisdiction of the IMF into financial transactions, instead of keeping it limited to the monetary aspects and BOP (balance of payments) problem," he said. Camdessus, who took over as IMF chief just before the Asian crisis erupted, said he hopes reforms in the global financial system would be pursued even after the current crisis, which changed the U.S. financial landscape and rocked global markets, is over.

"There's a phenomenon that's strange that you need a crisis to decide what should be enforced. But once the crisis is over you forget about the reforms and this indeed, I hope, will not be true of this year," Camdessus said.

"You must have global rules and global institutions to face these problems in an effective way," he said.

Global economic activity would be slower this year but the world economy was likely to return to its average growth of around 3 percent by the end of 2009, he said.

"The world, thanks to the dynamism of Asia, will avoid recession," he said.

A string of reforms have been imposed in the IMF since 2006 to keep the institution at the forefront of global economic oversight but there are still lingering doubts on the fund's effectiveness in light of the fast-changing global economy.

The fund, which along with the World Bank was created after World War Two, has been criticised for prescribing higher interest rates, bank closures and spending cuts to Asian countries during the regional financial crisis in exchange for billions of cash as lifeline support.

(Reporting by Rosemarie Francisco)