The International Monetary Fund said it has embarked on a study to review the fund's operations in order to better address the challenges in the global economy including China's rebalancing, which is yet to happen.
The study will try to understand the challenges facing the international monetary system, identify the system's shortcomings, and lay the basis for reform, the fund said.
According to IMF, the key challenge is shoring up growth in developed world in the post-crisis period.
"When we were at the epicenter of the crisis, emerging markets managed to remain anchored by using their buffers, and it was expected that there would be a "handoff" of sorts from emerging markets to advanced economies in a few years. But that handoff is not happening," said Siddharth Tiwari, director of the IMF's Policy, Strategy, and Review Department.
"A further challenge is China's rebalancing, which needs to happen. Growth will be lower, but likely safer." Tiwari added that this will inevitably have consequences for other economies.
The Fund said that the historic commodity price decline that necessitates adjustment for oil-producing countries in the Middle East and other commodity exporters, which need to find a new business model.
IMF also highlighted risks of continued volatility in financial markets owing to the differences in monetary conditions in the world's major economies.
"This asynchronous monetary policy among the United States, Europe, and Japan signals continued volatility. I would see these as the major issues ahead of us."
Tiwari said at the Fund, financial sector surveillance has been now strengthened, integrated surveillance decision was introduced, spillover analysis was broadened along with other work on interconnectedness, and we've overhauled our lending toolkit and sharpened our focus on risks and vulnerabilities.
The IMF's firepower has also increased, to about $1 trillion. Quotas were increased, the new agreements to borrow were brought on stream, and bilateral borrowings were undertaken. So it is time to review the system again.
The IMF said imbalances should not emerge in different parts of the world—especially the buildup of financial imbalances.
"We also need to ensure that emerging markets integrate into the international monetary system so that they achieve higher living standards. Financial development and deepening will be important for many member countries, especially in periods of greater market volatility," Tiwari said.