IMF mandate expanded, but disputes surround money

WASHINGTON, 29 April 1997 (G-77) - The International Monetary Fund (IMF) has expanded its mandate, but has failed to achieve agreement among member states to increase its resources.
The IMF’s key ministerial committee, known as the ‘Interim Committee’, concluded its spring meetings in broad agreement that the Fund should actively pursue full capital account liberalisation — or the free flow of capital — among its members.

This completes the organisation’s long-term mandate, which thus far has been ‘’to bring the world from exchange controls to current account convertibility,’’ says IMF Managing Director Michel Camdessus. The new mandate, he says, permits the agency to ‘’do a similar thing’’ for capital account transactions.

The IMF wants to increase the capital base against which it lends money so members implementing structural adjustment programmes (SAPs) can shore up their balance of payments.

But members remain at odds over the amount by which to increase the Fund’s 200-billion-dollar lending resources, as well as each country’s share of the increase in paid-in capital, known as quotas. These have been contentious questions since the Fund’s 1994 annual meeting in Madrid. The executive board now is charged with reaching a compromise in time for next September’s annual meeting in Hong Kong.

Citing a vastly expanded global economy since the last quota increase took effect in 1992, Camdessus last week suggested a 55-65 percent hike. Britain, Canada, Germany, and the United States consider this too great an increase, but would agree to a 45-50 percent rise, officials here say.

This had been a key concern of the ‘Group of 24’ (G-24) third-world bloc. In a communique, the G-24 finance ministers urged ‘’a clear and workable definition of capital account transactions to be covered, ...the consideration of restrictions introduced for prudential reasons, (and)...the need for flexibility to re-impose restrictions under specific circumstances’’.

G-24 members also say the EMU will test the IMF’s surveillance of member economies, which has intensified since the 1994-95 Mexican peso crisis. They say the Fund subjects developing countries to far more stringent economic surveillance than it requires of its richer members, and that this disparity should not get any worse once the EMU is in place.

‘’There are major implications of EMU for Fund surveillance, and it is important to ensure that the current, undesirable asymmetries in the application of surveillance are not further intensified by the advent of (the) EMU,’’ the G-24 ministers said in their communique.