The International Monetary Fund should be an essential port of call for emerging-market and developing countries facing financing needs. With its ability to mobilize large financial resources and buttress policy credibility, the IMF can help mitigate the large economic and social costs often associated with crises. Against this background, the world has come together in the midst of the crisis to radically overhaul the framework for IMF lending.
Now and in the future, the world needs the IMF to respond flexibly and effectively to its members’ needs. First and foremost, our financing packages should be large enough relative to the size of the problem to make a difference. In addition, the absence of an IMF insurance facility with acceptable terms has been a major gap in the global financial architecture, especially for the more dynamic emerging-market economies. This is despite all the evidence of the value of early access to IMF financing, before a tough situation deteriorates into a crisis.
Moreover, while it remains essential to attach policy conditions to IMF-supported programs, they should be focused squarely on solving a country’s critical problems, so that the conditions will be relevant rather than intrusive.
With our members’ support, we are implementing important reforms to our lending policies that will encourage countries to approach the IMF early on, before crises become severe and almost intractable. The reform comprises three core elements: