lars heikensten : the imf - mandate, means and governance in a changing world speech by mr lars heikensten, governor of the sveriges riksbank, at the joint imf - bundesbank symposium “ the imf in a changing world ”, frankfurt, 8 june 2005. * * * the question posed to this panel is " the imf – a panacea for every illness? ". that it is being asked at all indicates that confidence in the imf is strong today. i agree with those that have great confidence in the imf. nevertheless, my answer to the question is no : the imf is not – and should not be - a panacea for every illness. allow me to raise a number of issues against this background. focus on the core functions the imf has a unique mandate – to promote global macroeconomic and financial stability. this is the fundamental basis of sound economic performance. the imf ’ s mission is certainly not less significant today than it was before. it was no coincidence that when the imf was founded, in bretton woods in 1944, it was accompanied by the creation of the world bank and ( later ) the wto – with explicit areas of responsibility. it is important to adhere to these in order for each of the organisations to be able to work effectively and efficiently. a stable economic development is the basis of other international organisations'work. so it is vital that the imf continues to focus on its core functions – and to do it well. the imf's objective and instruments the imf's mandate is still valid in the main – in spite of the enormous changes that have taken place in the international financial system since the imf was created. we still need an organisation with the task to foster trade, employment and growth by promoting international monetary cooperation as well as macroeconomic and financial stability. on the other hand, there is always reason to consider whether the fund ’ s instruments to reach this overall objective should be modified. the imf ’ s main instruments today are surveillance, lending and technical assistance. allow me to say something about each of these. surveillance the imf's key instrument for reaching its overall objective should be its preventive activities, which are primarily carried out within the scope of its surveillance function. the imf's primarily role is not to treat illnesses but to prevent them from breaking out. much can be done to bolster the imf '

judging from the expectations of economic agents, a low - inflation regime has now been established. the composition of growth has also been favourable. after decades of growth that was generated to a high degree by rising consumption — with an accumulation of external debt — it is a healthy sign that expansion been associated with strong export demand and industrial investment. one result of this, the large current - account surpluses since 1994, has made it possible to repay external debt. a dramatic turnaround has also been achieved in government finances. massive budget deficits have been succeeded by a surplus. this trend is primarily a consequence of the economic recovery, just as declining activity was the main cause of the earlier fiscal collapse. but without the extensive measures for budget consolidation, neither the economic upturn nor the improvement in government finances would have been feasible. tax increases and spending cuts on the scale we have experienced in recent years obviously leave their mark. household income has been sharply restricted, particularly in 1995 – 96. so have public activities. in one respect, moreover, the outlook is still troublesome, namely as regards employment. despite the economic recovery, a rapid expansion of employment has proved difficult to achieve. it is worth noting, however, that the number of private sector jobs, in services in particular, has in fact been rising continuously since 1995. but this has not made up sufficiently for the contraction of employment during the 1990s in, for example, the public sector and construction. after this review of developments in recent years, i shall now discuss the riksbank ’ s appraisal of the coming twenty - four months, which is the period we need to consider when conducting monetary policy. 3. the message in june in the latest inflation report last june the riksbank presented an economic forecast for sweden and its implications for the path of inflation up to the middle of the year 2000. our assessment was that the trends in recent years, with high growth and low inflation, would continue in the years ahead. the economic upswing was assumed to continue in the forecast period, with annual growth rates around 2. 5 per cent this year and 3 per cent in the next two years. the forecast involved an increasing contribution from rising domestic demand, accompanied by a successive fall - off in export growth. private consumption was expected to pick up, partly in view of rising household income. - 3notwithstanding the prospect of further good economic growth in the coming years, the riksbank judged that the rate of inflation would remain low and