On What Terms Is the IMF Worth Funding?

Edwin Truman

No WP08-11, Working Paper Series from Peterson Institute for International Economics

Abstract: In the first decade of the 21st century the International Monetary Fund (IMF) faced crises of legitimacy, relevance, and budgetary finance. It now confronts what likely will be the worst global recession since World War II, potentially huge demands for its financial assistance with limited resources, and calls for it to play a more central role in the international financial and regulatory systems. At the same time, the incoming Barack Obama administration must decide what to do about the modest package of IMF reforms that was completed in the spring of 2008. The package requires US congressional approval to go into effect. This paper reviews the recent, slow progress on IMF reform and makes recommendations to the Obama administration against the background of that record, the emerging global recession, and continuing financial turmoil. I recommend that the IMF package be reopened to include a doubling of IMF quotas and an amendment that will permit the Fund to swap special drawing rights (SDR) with major central banks to finance its short-term lending facility. I also recommend a special allocation of 50 billion SDR. If these proposals are turned down by the G- 20 at its meeting in April 2009, I reluctantly recommend that the Obama administration seek congressional approval of the IMF package as it now stands because a failure to do so would seriously undermine the Fund as a central multilateral institution.

Keywords: International Monetary Fund; current account adjustment; exchange rates; financial turbulence; global recession; financial supervision and regulation (search for similar items in EconPapers)
JEL-codes: F02 F32 F33 F42 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (10)

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