ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

International Monetary Fund (IMF)Subscribe to International Monetary Fund (IMF)

Has the Financial World Arrived at a Collective Action Clause Consensus?

With truly astonishing speed (in a little over a month) collective action clauses in US bonds for sovereign issuers have moved from taboo, to a tentative first try (Mexico), to what looked like consensus on the clause (Uruguay), to more change (Brazil). What does this sudden move from a point of unwillingness to try even minimal change to one of everyday experimentation tell us about the dynamics of the underlying system? And where does this leave the policy debate?

IMF: Concerns, Dilemmas and Issues

The main concerns relating to the IMF's policies are relatable to intrusive conditionalities without due regard to the needs of and impact on the borrowers, with expanding scope of surveillance applied asymmetrically between borrowers or programme countries and others with no financial accountability except that of reputational risks. The response of the Fund has been to attune its policies to meet these concerns, emphasise aspects such as national ownership, leaving culture, transparency in its operation, independent evaluation and wider consultations. However, the basic limitations of resources, instruments and mandate in meeting the problems arising from volatile financial markets explain some of the persisting concerns. Three major issues are posed here for discussion to meet these concerns and improve the quality of resolving some of the tradeoffs and judgments involved. The first suggestion is to separate the surveillance function from lending, making the former somewhat independent of political processes as well as the weighted voting structure. The second suggestion is to remove the distortion in current voting strength by recognising intra-monetary union trade as not amounting to international trade since neither currency nor trade restrictions are in place and by accepting the Purchasing Power Parity basis of GDP computation. The third suggestion proposes that the Fund be given some authority to create limited but temporary liquidity under certain circumstances, to be "a lender of some resort".

IMF Conditions Stunt Growth

The IMF-World Bank recipe for poverty reduction in Pakistan has been accompanied by stringent conditions that have often exacerbated the country's economic woes and failed to meet the lending institutions' own targets. Also, governments in Pakistan have always passed the blame for these harsh steps on to the Fund-Bank combine, thus ducking out of tough decisions on land reform, imposition of agricultural income tax and beefing up tax administration.

IMF's New Guidelines on Conditionality

Will the IMF's new guidelines on conditionality, the outcome of a review initiated some two years back in response to criticism of the Fund's handling of the adjustment problems of crisis-hit countries in Asia, make a difference to countries' adjustment efforts in the future? How far are the new guidelines different from the 1979 ones?
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