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Issues Relating to the Treatment of Capital Movements in the IMF

In: Capital Account Regimes and the Developing Countries

Author

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  • Aziz Ali Mohammed

Abstract

The role of the International Monetary Fund in relation to capital movements has been under intensive discussion in 1997. Under the Articles of Agreement, a ‘member may not use the Fund’s general resources to meet a large or sustained outflow of capital … and the Fund may request a member to exercise controls to prevent such use’ (Article VI, Section 1(a)). In a world of rapidly growing but volatile capital flows and increasingly integrated capital markets, there is a vast potential for balance-of-payments difficulties emanating from the capital account. The current Article poses an apparent constraint on the ability of the Fund to help member countries whose policies might otherwise merit Fund support. Moreover, the widespread acceptance of the convertibility obligations of Article VIII has made the imposition of capital controls an untenable general prescription for the Fund to recommend, given the practical difficulties of distinguishing current from capital transactions in many developing countries.

Suggested Citation

  • Aziz Ali Mohammed, 1998. "Issues Relating to the Treatment of Capital Movements in the IMF," Palgrave Macmillan Books, in: G. K. Helleiner (ed.), Capital Account Regimes and the Developing Countries, chapter 7, pages 211-219, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26789-7_7
    DOI: 10.1007/978-1-349-26789-7_7
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