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On What Terms Is the IMF Worth Funding?

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  • Edwin M. Truman

    ()
    (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.

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Bibliographic Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP08-11.

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Date of creation: Dec 2008
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Handle: RePEc:iie:wpaper:wp08-11

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Related research

Keywords: International Monetary Fund; current account adjustment; exchange rates; financial turbulence; global recession; financial supervision and regulation;

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Cited by:
  1. Maurice Obstfeld, 2011. "The International Monetary System: Living with Asymmetry," NBER Working Papers 17641, National Bureau of Economic Research, Inc.
  2. Unknown, 2010. "Reform of the Global Financial Architecture," Working Papers 444, Bruegel.
  3. Eichengreen, Barry, 2012. "Implications of the Euro's crisis for international monetary reform," Journal of Policy Modeling, Elsevier, vol. 34(4), pages 541-548.
  4. Keynote Speech by Maurice Obstfeld, 2011. "International Liquidity: The Fiscal Dimension," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 33-48, November.

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