Despite concerns about the consequences of the credit market breakdown in rich countries spilling over into other countries, the IMF is nagging developing countries to open their capital accounts and looking to regulate sovereign wealth funds.
Nearly ten years on from the Asian financial crisis and the IMF has yet to find a workable solution to the need for a precautionary financing arrangement that helps middle-income countries prevent financial crisis. The IMF’s inability to articulate a plan to mitigate global economic risks will force countries to continue searching for ways to self-insure.
IMF conditionality undermines achievement of MDGs in Nicaragua
With the imminent departure of Anne Krueger from the post of first deputy managing director of the IMF, Rodrigo de Rato had a unique chance to move the Fund in a different direction as it looks to implement its medium-term strategic review. Instead, the managing director nominated US banker John Lipsky, maintaining the convention of keeping the top two posts at the Fund split between the transatlantic power centres.
Dialogue on Fund role in middle-income countries at the World Bank-IMF spring meetings in Washington, Thursday 20 April.
Brief highlights of NGO meeting with Tom Scholar, April 2006
Under the current IMF strategic review, a "review of the effectiveness of the Fund's instruments to facilitate crisis resolution" is planned. Ilene Grabel, professor of international finance at the University of Denver, argues that the Fund must move from being a reactive institution to being a pro-active one. The IMF should use its technical expertise to mitigate the risks that culminate in financial crises, involving a programme of 'trip wires and speed bumps'.
The managing director's report on implementing the Fund's medium-term strategy was discussed by the board 3 April and is anticipated to be released at the spring meetings. Civil society groups have been critical of the opaqueness of the process and the failure to broaden participation.
The IMF's strategic review portends changes in its mandate and structure, but critics charge that it does not go far enough.
A report by the IMF's Independent Evaluation Office released in May concludes that the Fund's "cheerleading" on capital account liberalisation in the early 90s was unbalanced and inconsistent.