How will the IMF, the World Bank, and other international financial institutions (IFIs) need to change over the next 10-15 years? This was the question asked—with particular focus on the IMF—by Michel Camdessus, IMF Managing Director from 1987 to 2000, in his Per Jacobsson Foundation lecture on September 25 in Washington, D.C.
He said the IFIs should continue to play a vital role in providing a global environment of stable and sustainable growth, helping emerging market countries develop, and helping the poorest countries reduce poverty. At the same time, they must help address a range of challenges including global current account imbalances, worldwide demographic transitions, and the global energy crisis.
But to continue performing these roles effectively, he said, the IFIs must adapt their missions, resources, and governance. And they need to do so in ways that take “on board the ethical requirements embraced by today’s public opinion”—good governance, public ownership of policies, and partnership between developing and developed countries.
How might the IFIs’ missions adapt? Camdessus outlined three priorities:
Strengthening IMF surveillance. The preliminary conclusions of IMF staff missions for country consultations should be open to public debate. The IMF should also pay more attention to long-term, structural developments; focus more on international spillovers and the systemic impact of countries’ policies (such as global payments imbalances); and conduct more precise analysis, with the World Bank, of efforts to meet the Millennium Development Goals (MDGs).
Better equipping the IMF. The IMF must be equipped with “explicit competence and proper instruments” in the areas of capital account liberalization and orderly debt workouts, and for its role as an international lender of last resort. On capital account liberalization, “with the benefit of hindsight” [since the failed moves of 1997 to amend the IMF’s Articles of Agreement to give the IMF jurisdiction in this area], “we should now revisit the issue, taking advantage of the lessons learned.” As the international lender of last resort, the IMF should be authorized to inject international liquidity temporarily at times of crisis, through the creation and selective allocation of special drawing rights (SDRs).
Adapting financing instruments. All development partners should “concentrate their means and leadership in contributing to the MDGs.” The World Bank’s role as a long-term lender should be increased, including through greater concentration on infrastructure investment. And the IMF’s membership should reaffirm its mission in support of its poorest members “as an essential part of its purposes under the Articles [of Agreement],” provide higher access to its concessional windows, and not relax the discipline of conditionality, which he did not view as being in contradiction with country ownership of programs.
Adapting resources and governance
On IMF human resources, Camdessus called for “strengthening, not downsizing” its staff. On IMF financial resources, he reiterated his view on the need for “significant periodic increases in quotas” and also for periodic allocations of SDRs. And on adapting governance, he called for the introduction of a “Council”—a political decision-making body that would be responsible for the major strategic decisions relating to the IMF—as well as for reforms in the size and composition of the Executive Boards of the IMF and the World Bank and in the procedures for selecting the heads of the two institutions.
The full text of Michel Camdessus’s lecture, International Financial Institutions: Dealing with New Global Challenges— Per Jacobsson lecture 2005—is available on the Per Jacobsson Foundation website, http://www.perjacobsson.org.
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