Is Restructuring Of IMF required In The Present Context of

Globalization

By

Manjunath H N

Mithilesh L N

IMF

The International Monetary Fund (IMF) is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments

It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalizing economic policies on other countries as a condition for loans, restructuring or aid

Members

Members of the IMF are 186 of the UN members and Kosovo

The other non-members are: North Korea, Andorra, Monaco, Liechtenstein, Nauru, Cook Islands, Niue, Vatican City and the rest of the states with limited recognition.

All members appoint a Governor to the IMF's Board of Governors

Board of Governors

The Board of Governors is the highest decision-making body of the IMF. It consists of one governor and one alternate governor for each member country

The governor is appointed by the member country and is usually the minister of finance or the head of the central bank.

The Board of Governors also elects or appoints executive directors and is the ultimate arbiter on issues related to the interpretation of the IMF's Articles of Agreement. Voting by the Board of Governors usually takes place by mail-in ballot.

Ministerial Committees

The IMFC is responsible for advising, and reporting to, the Board of Governors as it manages and shapes the international monetary and financial system. The IMFC also monitors developments in global liquidity and the transfer of resources to developing countries

The Development Committee is a joint committee, tasked with advising the Boards of Governors of the IMF and the World Bank on issues related to economic development in emerging and developing countries.

Executive Board

24-member Executive Board These 24 board members represent all

187 countriesThe Board discusses everything from the

IMF staff's annual health checks of member countries' economies to economic policy issues relevant to the global economy.

IMF and Globalization

Marked by massive movements of capital and abrupt shifts in comparative advantage, globalization affects countries' policy choices in many areas, including labor, trade, and tax policies.

Helping a country benefit from globalization while avoiding potential downsides is an important task for the IMF

Need for Restructuring Of IMF

Inability to Prevent Global Economic CrisisChanges in Communication and

Technology

Areas of Restructuring

Defining a New RoleGovernanceSurveillance and AnalysisLendingFinancial Sources

Defining a New Role

Make Crisis Prevention and Crisis Resolution to go hand in hand

Work Out a Relationship with The World Bank and avoid “overlaps”

Reduce the number of extraneous roles

Crisis Prevention

Significant improvement in the Quality of Fund’s Financial and Economic Surveillance

Reform of the member’s obligations so as to bring about a reasonable degree of Multilateral discipline

Reducing The Number of Extraneous Roles

Involvement in Surveillance of Developing Countries

Identifying another organization or body better suited to carry out certain activities, including work on terrorist financing and money laundering

World Bank and IMF

The IMF should pull back from debt relief programmes in developing countries as this would “help clarify the roles of the IMF and the World Bank.”

Fund should utilize the expertise of the World Bank in social and poverty issues, to augment the Fund’s more macro-economics based analysis. The IMF should remain within its remit of crisis prevention, not extend its activities into areas of social policy and development it does not appear to be equipped to deal with.

Governance

While we note that changing the quotas may have no discernible effect on how the Fund operates, there is a good case for reforming the quotas to improve the Fund’s governance

There is a balance to be struck between the rights of those that provide the Fund’s resources, and the needs of those that utilise those same resources

Quotas Reform and Appointment of CMD

Ensure that all countries are better represented in the governance structure of the IMF

Open selection process for the IMF’s managing director so that it could be less Transparent

Enhancing the Executive Board and IMFC

There needs to be a resident board, to allow effective oversight of the Fund’s activities. This underlines the need to ensure proper representation of all the Fund’s members

We welcome the moves to make the IMFC more effective. It is important that, as a high level body of the IMF, it is particularly cognizant of its role in providing guidance and oversight of the work of the Fund.

Other member countries to persuade the Fund to release more material, including Executive Board minutes.

Surveillance and Analysis

it seems entirely appropriate that the IMF, as the guardian of the global financial system, should seek to redouble its efforts in assessing the effects of the interplay between the world’s economies

Ensure that there is broad consensus for this change in focus of the surveillance across all members of the Fund.

Multilateral consultation

IMF’s new approach to multilateral consultation, given the Fund’s new focus on crisis prevention

member states must feel that the actions that may be required from the conclusion of this process will be broadly beneficial

In a manner which reinforces its neutrality and authoritativeness of the Fund

IEO

The Independent Evaluation Office (IEO) has been a significant success

it still has scope for further development, especially given the International Monetary and Financial Committee' recommendation to include the IEO within the oversight of the surveillance remit

Conditionality in Lending

Key concern about conditionality has been that it appears to undermine the sovereignty of the countries receiving IMF support

Conditions with a Democratic process Should be Advocated

New Lending Facilities

Exogenous Shocks Facility (ESF): “policy support and financial assistance to low-income countries facing exogenous shocks”, where exogenous shocks are described as including “commodity price changes (including oil), natural disasters, and conflicts and crises in neighbouring countries that disrupt trade”.

it Should be designed so as to ensure that all member states that require it are not dissuaded by onerous conditionality

Financing Of IMF

The Fund’s primary source of income derives from the difference between the interest received on its lending activities and the interest it has to pay out to the member states that hold money with the Fund

separate funding and lending decisions.

Reform In Financing

The search for a solution to the long-term financing of IMF operations should be considered against two criteria

The first is that poorer nations should not have to pay to gain access to the range of services the IMF can provide. The second is that funding for surveillance should be seen to be as independent as the actual analysis, especially where the IMF may also be a lender to a specific country

THANK YOU