I.M.F. Gains Sway, but Its Authority Is Uncertain

WASHINGTON — Can the International Monetary Fund achieve what seems like a mission impossible: bridge the increasingly tense currency and trade disputes that threaten to set back the uneven global recovery?

That is what leaders of the world’s largest countries are hoping, even though a number of international economists are skeptical.

A weekend gathering in South Korea of officials from the Group of 20 economic powers ended Saturday with a collective vow to avoid a foreign-exchange war. But they failed to agree on an American proposal to set a numerical limit on the trade imbalances that have been identified as a source of global economic instability.

So G-20 officials, including the United States Treasury secretary, Timothy F. Geithner, instead decided to strengthen the I.M.F.’s nascent, but largely untested, role as the arbiter of international economic frictions.

Keeping its 187 members in line has not always come naturally to the I.M.F. It is best known for bailing out fiscally stricken nations, giving political cover to — and taking political heat for — debt-burdened governments as they cut spending, raise taxes and restructure their balance sheets.

But its longstanding role as a monitor of fiscal and monetary policies is taking on new emphasis.

To support that expanded monitoring, the G-20 officials agreed on a huge increase in the fund’s resources; a historic shift in voting power toward fast-growing emerging markets and away from the richest nations; and a stronger mandate for the fund to monitor — and criticize, when necessary — the policies of its members.

Whether the I.M.F. is up to the task of policing its members and exerting influence on the most powerful ones remains far from clear.

“At present, there is no effective international umpire who can call a foul on countries for their policies,” said Eswar S. Prasad, a former I.M.F. economist who now teaches trade policy at Cornell. “The I.M.F. can say its piece, but is ineffectual when it comes to influencing the large economies.”

Even the I.M.F. is aware of its own limitations. While Dominique Strauss-Kahn, the fund’s managing director, lauded what he called “the most important reform in the governance of the institution since its creation,” he acknowledged the magnitude of the challenge.

“The I.M.F. is a multilateral institution, but we don’t have real teeth,” Mr. Strauss-Kahn said on Saturday at the close of a two-day meeting of G-20 finance ministers and central bankers in Gyeongju, South Korea. “We cannot oblige a country to do something, but what we can do is to notice that a country has a commitment and fulfills, or not, a commitment.”

He added, “To be able to say to a country publicly, ‘What you’re doing is wrong,’ we probably need to extend the mandate of the I.M.F.”

For the United States, which helped create the I.M.F. in 1944 as part of the Bretton Woods system of managing global economic relations, the new reliance on the I.M.F. stems from a recognition that it cannot unilaterally compel China, now the world’s second-largest economy, to do what it wants. The United States for months has been pressing China to let its currency rise in value and realign its economy, away from a dependence on exports and toward domestic consumption.

“The I.M.F. has to play cop; that’s what it exists to do,” Mr. Geithner told Bloomberg Television on Saturday. “No country can be the independent, unilateral arbiter of exchange-rate misalignments. And no country can, on its own, figure out how best to reduce a persistently large imbalance. It requires cooperation.”

The I.M.F. said it realized that addressing the currency issues was a priority.

“The main threat to this recovery would be to enter an endless fight on current account surpluses and exchange rates,” Mr. Strauss-Kahn said Saturday. “I don’t like to use the term ‘war,’ because it has been too much used, but let’s say a confrontation.”

Germany, an export powerhouse, resisted Mr. Geithner’s proposal that G-20 countries aim to limit the surplus or deficit on their current account — the broadest measure of a nation’s trade and investment — to no more than 4 percent of gross domestic product. (Germany has a projected current account surplus of 6.1 percent this year, compared with a 4.7 percent surplus for China and a 3.2 percent deficit for the United States.) But the Germans and Americans were on the same page regarding the I.M.F.