Is the IMF Irredeemably Irrelevant?
Commentary by Paranjoy Guha Thakurta
NEW DELHI, Dec 8, 2006 (IPS) – Has the International Monetary Fund (IMF) become completely irrelevant? Is this world body, set up more than six decades ago to foster global economic stability and help countries facing financial crises, really reforming itself? And will it become more responsive to the aspirations of developing countries?
Opinion is sharply divided on these questions as the IMF undergoes an exercise to change its "quota and vote" system that is linked to the financial commitments made by 184 countries that are its members. A member's quota delineates basic aspects of its financial and organizational relationship with the Fund, including its powers to vote and its access to loans.
Three years ago, the IMF had loaned more than 100 billion US dollars to various countries to help them tide over problems including management of external balance of payments. This amount has now shrunk to less than 20 billion dollars a year. In fact, instead of primarily being a lender of funds, the IMF has become a net receiver of funds with an inflow in excess of 20 billion dollars in the form of repayments of past loans, much of it from developing countries.
"The IMF has today become completely irrelevant," observed Prof. Jayati Ghosh who teaches economics at New Delhi's prestigious Jawaharlal Nehru University, in an interview with IPS. Not exactly, argue officials of the Washington D.C.-headquartered organisation that was established in 1945 after the end of the Second World War in the wake of the historic Bretton Woods conference. "We should celebrate the fact that countries do not need the Fund in emergency situations," an IMF official told IPS.
Addressing a conference of finance ministers of Commonwealth countries in Colombo on Sep. 13, India's Finance Minister Palaniappan Chidambaram caustically remarked: "It is widely believed that the present quota formula of the IMF is hopeless flawed and outdated. Obviously, an ad hoc quota redistribution based on this flawed formula cannot provide a durable solution. We need a consensus on a new formula. And we need it quickly. There must be a deep commitment to fundamental reform and there should be no postponement of a comprehensive review