15 April, 2009

Mission: possible

The IMF has been promised lots more money and has a new sense of purpose. But reform is still needed—especially if it is to win the trust of emerging economies.
The leaders of the world’s biggest rich and emerging economies decided in London that the IMF should both have more resources and play a broader role in the world economy than in the past.

They said that the fund’s resources were to be increased by $500 billion to $750 billion, and that it would be allowed to issue $250 billion-worth of its own quasi-currency, the Special Drawing Right (SDR), to ease liquidity in emerging and developing economies.

The G20 also expects the IMF to ensure “candid, even-handed, and independent surveillance” of big economies and their banks, of the impact of their policies on others and of risks facing the global economy.
Cynics will argue that the summiteers trumpeted the strengthening of the fund because this was the one substantive thing they were able to agree on. They made no new promises on co-ordinated budgetary stimulus, for example, and the details of what the G20 will do for trade finance remain uncertain. Even so, it is indisputable that the G20 meeting confirmed a steady rise in the IMF’s star in recent months.

It has recently overhauled its lending schemes, along with the conditions attached to its loans, and already begun providing funding that looks more like crisis insurance than its usual loans for countries that have got into trouble. China and Russia have even talked about making it the issuer of a global reserve currency to replace the dollar.
-- read here for more.

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