IMF fights for legitimacy
Washington, July 1:
Ten years after playing a controversial role in the Asian financial crisis, the International Monetary Fund (IMF) is now in the midst of its own identity crisis.
The six-decade old institution, which lent over $38 billion during a two-year period to Asian countries on the condition they adopt strict au-sterity measures, finds itself 10 years later shunn-ed by many of the states it had previously helped.
“The Asian crisis was the beginning of a pro-cess whereby, over the last decade, the IMF has lost most of its influence in the world,” said Mark Weisbrot, co-director of the Center for Economic and Policy Research, a left-leaning Washington-based think tank.
Forged in the ashes of World War II to guard the stability of the international financial system, the IMF today is facing pressure to reform its own practices. Critics cl-aim IMF serves the interests of wealthy nations by seeking to impose free market practices.
Venezuelan president Hugo Chavez announced in May that his country was quitting the IMF and the World Bank, which he described as a ‘tools of US imperialism’ that exploit poor countries.
Caracas, following the lead of several other countries in Latin America and Asia, has repaid all its IMF debts.
Several other Latin American presidents, including Nestor Kirchner of Argentina and Rafael Correa of Ecuador, have also not hiden their disdain for the IMF.
At its last general assembly in Singapore, the IMF came under pressure to allow poor and developing countries more of a say with its executive board.
Several countries could benefit from changes to how the Fund is governed, as South Korea already has with its new voting rights. Prog-ress could be reached at a Fund meeting planned for October, but the process could also drag on much later into 2008.
In the past 10 years since the Asian financial crisis, several IMF client states have ridden a bout of strong economic growth, rendering IMF missions to their countries redundant.
New regional institutions have also emerged to challenge the IMF’s status, and a long period of robust global growth and an explosion of private credit on global markets has also opened up rival avenues for countries seeking funds.
The IMF’s reform process, meanwhile, has been moving slowly.
The Fund’s exchange rate surveillance role has emerged as one of the most challenging issues facing the IMF, an issue which also carries some diplomatic risks. It is see-king more leverage on its members’ forex policies.