BRUSSELS – The International Monetary Fund is back in business. During the bubble years, neither its advice nor its money seemed to be needed. But now more and more countries need balance-of-payments support, and there is general agreement that the global monetary system needs a body to oversee its overall stability. The IMF is the only candidate for this task, but experience has shown that the Fund can fulfill this role only if its governance is reformed.
Granting balance-of-payments support has important fiscal implications, and it is natural that there should be continuing close oversight by those who ultimately provide the capital – the IMF’s member states.
But looking after the stability of the global financial system, including the assessment of exchange-rate policies and global payment imbalances, is a different responsibility. For these analytical functions, there is no need for close oversight. On the contrary, independence and professional expertise should be decisive. Thus, a key change should be to distinguish between the IMF’s financial measures and its analytical functions, especially the surveillance of exchange rates and other sources of global financial risk.
The IMF’s Executive Board, which consists exclusively of representatives of member countries, currently runs the Fund’s daily business. The Board thus does not perform oversight functions, but rather serves essentially as an extended Management Board, which delegates the execution of its decisions to the Managing Director and the staff.