Does the international monetary fund have sufficient financial resources?

Since 2009, in response to the global financial crisis, the IMF has made fundamental changes in all the main aspects of its activities (governance, surveillance and lending policies, and institutional culture). These have been accompanied by a notable increase in the IMF’s financial resources, driven by the G20, with a quadrupling of resources between 2008 and 2013, to nearly one trillion Special Drawing Rights (SDRs), approximately equivalent to USD 1.5 trillion. The intensity and scope of the global crisis, which spread to economies with developed financial systems and high levels of borrowing, made a sharp increase in the IMF’s resources essential. This increase has been implemented in a number of steps, using various financing sources and instruments, a process that will be completed when the United States ratifies the quota reform approved in 2010 (the 14th review), which should have entered into force already. However, the debate regarding the size of the IMF’s resources and their composition, in terms of instrument type and the country allocation, remains open. As a result of the approved decisions, a large proportion of the IMF’s resources will be borrowed funds (rather than own resources, i.e. quotas), and a significant percentage will be temporary. In addition, the composition and allocation of resources have implications for governance and voting power within the institution. The G20 has already resolved to carry out a further quota review (the 15th), which was due to be completed in January 2014, but has been delayed until the 2010 reform is finally approved. This article describes how the IMF’s resources have evolved following the financial crisis, in terms of volume and composition, and the main aspects of the debate that remains open regarding the size of the IMF, a debate that is linked to the role this institution should perform in the management and prevention of future crises. The first aspect to be considered is sufficiency, i.e. the IMF needs to have sufficient resources to fulfil its mission, contributing to the stability of the international monetary system and to the maintenance of external and internal balance in its member countries. Two other relevant aspects are neutrality (i.e. whether the volume of the IMF’s resources minimises the problems of moral hazard, without encouraging risky behaviour by potential international borrowers and investors) and flexibility and speed in mobilising resources. The assessment of these aspects (sufficiency, neutrality and flexibility) is sometimes based on conflicting considerations, so that there is no unequivocal solution to the problem of the size of the IMF, although flexibility is always a good palliative for uncertainty.