IFI governance


IMF facilities review exposes image problem

31 March 2014

The IMF met in February to discuss a paper on the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL) and the Rapid Financing Instrument (RFI), lending instruments created after the 2008 financial crisis (see Bulletin Dec 2013; Update 65). So far, no countries have utilised the RFI, whilst Morocco has a PLL arrangement and three countries have entered an FCL arrangement: Colombia, Mexico and Poland. The paper analysed the lack of demand amongst emerging markets, with country surveys blaming “the persistently negative image that the Fund has among many civil society opinion leaders, NGOs, and the general public, particularly in countries affected by past crises”. The paper identified that countries in stress are instead “seeking to expand regional financing arrangements (RFAs) and … other smaller countries unable to participate in regional pooling are building substantial international reserve buffers for self-insurance”.

In October 2013, the Indian finance minister, Palaniappan Chidambaram, stated in public critique of the failure to implement the IMF’s 2010 voting reform (see Bulletin Dec 2013) that “the IMF’s failure to identify certain risks and give clear warnings [of member states’ economies] … questions the relevance and usefulness of the IMF exercise with regard to policy settings”. According to Peter Bakvis of the International Trade Union Confederation, the principal recommendation from the Fund’s policy paper boils down to that “the IMF should engage in a more aggressive public relations exercise”. The IMF has said that the next review will take place on a “needed basis”.