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Refo rm proposals aimed at making the International Monetary Fund (IMF) better able to face modern financial challenges would substantially change the way the so-called lender of last resort operates, a US Treasury Department official says.

Outgoing under secretary John Taylor said that one of the most important proposals to be discussed at the April 16 to April 17 sessions of the IMF and World Bank policymaking bodies would allow the IMF to assess the economic policies of countries that do not need the fund’s resources.

US officials have said that such a proposed monitoring arrangement would allow the IMF to signal its approval or disapproval of, and provide markets with a clearer view of, a country’s economic policies.

Taylor said that this arrangement -- combined with other reforms such as the inclusion of collective action clauses in sovereign bond issues and 100 per cent debt forgiveness for the most impoverished countries -- would make the IMF more productive.

Speaking to reporters this week, Taylor previewed international meetings taking place in Washington from April 15 to April 17 including the meeting of the Group of Seven (G7) countries' finance ministers and central bank governors.

The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

He said he believes that progress will be made on several issues, including debt forgiveness for poor countries.

The US proposal for complete debt forgiveness for the most impoverished countries was gaining support.

But discussions continue among World bank and IMF members as to which countries qualify.

The goal is to reach agreement in principle before the July summit of the Group of Eight (G8) countries in Scotland.

On another issue, Taylor said that China has largely completed the preparations necessary to move to a flexible exchange rate.

Its currency is currently tied at a fixed rate to the US dollar.

The US has stated that China could have a flexible exchange rate immediately, a view shared by other G7 countries and the IMF.

G7 ministers will also discuss sluggish growth in some developed countries, energy prices, global current account imbalances and a number of other issues.

Taylor also said that global economic expansion is so solid that high oil prices will not derail it. Treasury secretary John Snow, in addition to participating in those discussions, will have a series of bilateral meetings with officials from Brazil, Canada, France, India, Iraq, Japan, Mexico, Russia, the United Kingdom and the Palestinian Authority, the Treasury Department announced.

He also will participate in a round table discussion with African leaders.

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