The International Monetary Fund (IMF) and the World Bank (WB) should be reformed to adapt to the changing situation today, and to make themselves "more representative and legitimate" on an international scale, a UK financial expert said on Tuesday.

In an interview with Xinhua, Panicos Demetriates, an economics professor at Leicester University, said that a reform of the international financial system is absolutely essential, and should high on the G20 summit agenda.

"The IMF and the World Bank, which are widely perceived as institutions that are implicitly protecting the interests of industrialized countries ... lack legitimacy, especially so in developing countries," Demetriates said.

Governance reform, of course, should be the first step to improve the performance of the IMF, said the professor. Besides that, a change of concept among the economists inside the IMF is also essential, he said.

According to Demetriates, many economists have been "brainwashed" into believing in the unlimited power of a free market, "which is frequently supported by very fragile research."

"Government-owned banks are not necessarily bad for growth, as held by the financial institutions," the professor said.

"Such a conclusion is extremely fragile, if not altogether flawed," he said, adding that some of his own research, about to be published shortly, suggests that this conclusion is unjustified.

The final report of reform measures within the IMF was submitted by a special committee to the organization on March 24, "we will see a new IMF that has greater international legitimacy with effect from April 2010," Demetriates said.

The suggestion of accelerating the quota revision process, the elimination of appointed chairs, and a more open process for the appointment of the managing director and deputy managing directors of the IMF, if adopted, will help people see a "much more representative and transparent IMF" in the future, he said.

He even suggested the IMF and the World Bank move their headquarters from Washington D.C. to some developing countries, and recruit more European and Asian staff, and not just from the United States.

(Xinhua News Agency April 1, 2009)