BIC's new IMF Program supports and assists global civil society in informed engagement on macroeconomic policies supported by the IMF. The program aims to stimulate wider public debate on the IMF’s new priorities as well as existing and future operations with a particular focus on identifying opportunities for reform.
This page is under construction. Please check back periodically for updated information.
The IMF: A brief history
The International Monetary Fund was established in 1944 at the Bretton Woods conference. It was conceived alongside the World Bank, to provide a framework for international economic cooperation.
IMF operations include surveillance of both member countries and the global economy; technical assistance; and financial support.
The IMF in crisis mode
The IMF is currently going through significant challenges as an institution. If approached correctly, these challenges represent opportunities for concrete reform and, for some, an opportunity to discuss whether or not the IMF in its current form should exist. These challenges are largely summed up as a relevance crisis and a budget crisis, at least in the medium-term.
Relevance crisis
In part, many core IMF functions (i.e., crisis resolution / “insurance” exchange rate management, financial policy advice, and surveillance) are being carried out through alternative arrangements/mechanisms, including inter alia: higher levels of foreign reserves, new regional/bi-lateral lending arrangements, and remittances from citizens abroad. The unprecedented build-up of foreign reserves, particularly in East Asia, is widely interpreted as being motivated, in part, by the determination to avoid having to turn to the IMF in case of financial crisis. Furthermore, greater liquidity in capital markets provides many middle-income countries with alternatives.
Furthermore, there are several substantial bi-lateral lending arrangements, such as: Venezuela to Argentina, oil-rich countries to needy Muslim nations (Middle East and Africa), and China to Africa (as well as other countries ). To add to the mix, there are also regional arrangements. Most notably, Asian countries have renewed efforts at establishing swap facilities between the region’s central banks to pool resources (currently around $70 billion) against speculative attacks .
Furthermore, increasingly the rules underpinning global financial governance are being set by private actors and groupings of national regulatory institutions, such as the International Federation of Accountants (IFAC), Inter-Agency Standing Committee (IASC) and the International Organization of Securities Commissions (IOSCO). In addition, the private sector is a source of frequent and up-to-date surveillance information, in contrast to the relative infrequent Article IV Consultations, which occur only every 12-18 months.
Medium-term budget crisis
Largely due to the high political and sovereign costs and the current state of the global economy, borrowing from the Fund is at its lowest level in decades. For example, significant IMF debtors that have declined further IMF assistance include: Pakistan (third largest), Ukraine (fourth largest), Serbia, and Azerbaijan. Furthermore, in FY2005 and 06 there were just 14 and 13 lending operations respectively – the lowest since 1975. Adding to the revenue shortfall confronting the Fund, many middle-income countries, including some of the IMF’s largest debtors, have already or plan to pay off their IMF debt well ahead of schedule, including: Thailand, Russian Federation, Brazil, Argentina, Indonesia, Turkey, and Uruguay.
Don’t write off the IMF just yet
Even though the IMF is in crisis, the IMF has reinvented itself many times in the past (it has come a long way from its original focus on servicing the industrialized countries of Europe after WWII). And, even if large reserves have been accumulated and alternative arrangements developed, countries are likely to call upon the IMF if and when they face a sizable crisis where alternative arrangements are just not sufficient. Furthermore, if powerful actors, such as the US and EU find the IMF useful (despite what they may say publicly), then the IMF will likely continue to exist and be used to forward the economic reform agendas of the powerful (see also the last paragraph in the Lending Trends section below).
Read more about the IMF's Medium-Term Strategy on the IMF - policies webpage.