WASHINGTON, DC – When Ministers meet for the IMF’s Spring Meeting this month they will find an institution with regained self-confidence. The London G20 summit gave a strengthened mandate to the IMF, while tripling its resources. More concessional finance will be available for low-income countries, and international liquidity will be increased by a hand-out of $ 250 billion in special drawing rights (SDRs). This is a boost for the IMF, and it gives hope to emerging and developing countries that have been severely hit by a crisis that originated elsewhere.
The IMF is well-positioned to help its members overcome the financing gaps resulting from the crisis. In the run-up to the G20 summit access to the Fund’s credit facilities was increased and policy conditions were streamlined. In a watershed with former practice, a new non-conditional credit line was introduced for well-performing countries. Mexico and Poland will be its first users and more countries will line up. These more flexible lending policies reflect a new image of the IMF. The negative stigma attached to IMF financing is a thing of the past.
Its financing role in this crisis secured, the IMF now needs to strengthen its position as guardian of an open international financial system. The IMF was created to prevent crises like the current one and in this it has failed. Admittedly, there were warnings, but policy makers, particularly in advanced countries, did not follow suit.
The ‘new’ IMF should be an institution that communicates better with its members, balances the interests of its advanced, emerging and developing members in an evenhanded manner, and aligns its policies better to the needs of the moment. Now that the IMF has been given a second lifetime, it needs to regain its central position in the international financial system. For this, it needs to focus on three issues: improved surveillance of financial stability, strengthened international coordination, and an updated decision-making process.