狼子野心翻译ANALELE ŞTIINłIFICE ALE UNIVERSITĂłII …ALEXANDRU IOAN CUZA” DIN IAŞI Tomul LVI ŞtiinŃe Economice 2009 REDEFINING THE ROLE OF INTERNATIONAL MONETARY FUND IN THE LIGHT OF THE CURRENT ECONOMIC AND FINANCIAL CRISIS
Gheorghe VOINEA*, Sorin Gabriel ANTON**lcp
Abstract
By any measure, the current economic recession is the worst since the 1930s. The unprecedented global financial and economic crisis that started in 2007 has had a profound impact on the work of international financial institutions. The reform of the international financial system reprents an important topic nowadays. The paper propos far-reaching reforms of the International Monetary Fund in order to address the global financial crisis. The paper analys reforms covering following areas: lending framework, the IMF’s lendable resources, creation of a new international rerve currency, enhanced surveillance, and governance.
Key words: International Monetary Fund, reform, financial crisis, developed countries, lending framework.
JEL classification: F02, F33, G01.
1. Introduction
Before the ont of current economic and financial crisis in 2007, in the financial lit-erature there was an ongoing debate on the declining role of IMF in a world of increasingly free capital mobility where the financing needs of more and more developing countries were covered by capital markets. Many authors suggested that the IMF has lost its relevance in the last years. Stiglitz considered that IMF “has failed mirably in its mission to stabilize international financial flows, arguably making matters wor” [Stiglitz, 2003, 54]. Dieter ar-gued that during the last two decades, the World Bank and the International Monetary Fund proved to be unable to provide sufficient stability [Dieter, 2004, 54]. The governor of Bank of England, Mervyn King, obrved that “the Fund’s remit is unclear. Its lending activities have waned, and its role in the international monetary system is obscure” [King, 2006]. Jean Pisani-Ferry argued that the IMF has not been able effectively to exerci its mission to “overe the international monetary system in order to ensure its effective operation” [Pisani-Ferry, 2008, 4].
Griffith-Jones and Ocampo identified three transmission mechanisms of the financial crisis from developed to developing countries: remittances, private capital flows (volumes
*Gheorghe VOINEA, PhD, Professor, “Al. I. Cuza” University of Iasi, Faculty of Economics and Business Administration.
**Sorin Gabriel ANTON (sorin.), PhD, Assistant Lecturer, “Al. I. Cuza” University of Iasi, Faculty of Economics and Business Administration.
Redefining the Role of International Monetary Fund in the Light of the Current Economic (203)
and associated costs of such flows) and trade [Griffith-Jones and Ocampo, 2009, 1-8]. As the withdrawals of private capital flows from the developing countries advance, the need for financial assistance is rising again. In this context, IMF is regaining its key role in provid-ing conditional financial assistance to countries hit by the global financial crisis.
2. Financial literature regarding the IMF’s reform
From the beginnings in the 1940s through to the prent day there have been numerous calls for reform of the International Monetary Fund. Exchange rates and convertibility, the IMF role as international lender, the lending policies and its key role in international mone-tary management have been subject of controversy over a long time [Ingham, 2004, 278]. Many voices from the develo
ping countries openly questioned the sincerity of IMF advice and the structure of its governance [Pisani-Ferry, 2008, 1].
Joph Stiglitz criticized the role played by the IMF in the currency crisis of the 1990s in Argentina, Eastern Asia, and Russia. In his book, Globalization and its Discontents, he propod reforms covering following areas:
a)the IMF should disclo the poverty and unemployment impact of its conditionality requirements;
b)the IMF needs to pay more attention to improve the safety nets in vulnerable countries;
c)the IMF should deal with financial crisis through bankruptcy instead of bailout of creditors;
d)the respons to financial crisis in developing and transition economies have to be placed within the social and political context of the countries [Ingham, 2004, 278-279] .
Griffith-Jones and Ocampo considered that there are three esntial reforms of the IMF: i) the creation of a meaningful and truly global rerve currency, ii) the need to place the IMF at the center of global macroeconomic policy coordination giving greater voice to developing countries; iii) the need for the IMF to lend during balance of payments cris rapidly, at sufficient scale, and without ov
erburdening borrowers with conditionalities of the past, particularly when the sources of the crisis are exogenous [Griffith-Jones and Ocampo, 2009, 3].
3. Reform agenda
3.1. Reform of the lending framework
The IMF has implemented in the last two years a ries of reforms that modernized its operations and strengthened its lending framework. In march 2009, the IMF Executive Board has approved a major overhaul to the Fund’s lending framework by: •enhancing the flexibility of the Fund’s traditional Stand-By Arrangement (SBA), •modernizing IMF conditionality for all borrowers,
katie holmes•introducing a new Flexible Credit Line (FCL),
•doubling access limits for nonconcessional resources,
•adapting and simplifying cost and maturity structures for its lending, and •eliminating facilities that were ldom ud […IMF Overhauls Lending Framework”, 2009].rules
204 Gheorghe VOINEA, Sorin Gabriel ANTON
In the last year, the Central and Eastern European(CEE) economies have been hit very hard by the deep and protracted slowdown of the world economy. The combination of fal-ling export prices, rising import prices, falling demand from trading partners (especially form the European Union), relatively low foreign exchange rerves compared with high ex-ternal debt levels, and reduced access to international financial markets are expected to weaken growth prospects for the CEE countries. Taking the developments into account, the overall financing needs of the countries for the next two years are large. In order to address the financial gap of the countries, the IMF and other financial institutions have provided external financial support. Table no 1 describes the loans granted by the IMF to the CEE countries since October 2008. All the Stand-By Arrangement entail exceptional ac-cess to IMF resources and were approved under the Fund's fast-track Emergency Financing Mechanism procedures, which enable rapid approval of IMF lending to its member coun-tries.
Table no. 1 - Loans from international financial institutions for the countries from Central
and Eastern Europe granted since October 2008 (US$ billion)
Country Amount (from
IMF) Other lenders Date of approval Instrument/Period of
time
Ukraine US$16.4 billion - November 5, 2008 Stand-By Arrangement,
24 months
Hungary US$15.7 billion EU and World
Bank November 6, 2008 Stand-By Arrangement,
17 months
Latvia US$2,35 billion EU, EBRD, WB
and other bilateral
creditors.December 23, 2008 Stand-By Arrangement,
27 months
Belarus US$2.46 billion - January 12, 2009 Stand-By Arrangement,
15 months
Serbia US$530.3
million - January 16, 2009 Stand-By Arrangement,
15 months
Romania US$17.1 billion EU, WB, EBRD,
EIB, IFC May 4, 2009 Stand-By Arrangement,
24 months
Serbia US$4 billion - May 15, 2009 Stand-By Arrangement,
27 months
Poland US$20.58
billion - May 6, 2009 Flexible Credit Line, 12
months
爵士乐Sources: [IMF, 2009]
In many cas, the large external financing suport has been provided jointly by the In-ternational Monetary Fund,the European Union, and the World Bank. For example, in the ca of Romania, the total international financial support package will amount to €19.9 bil-lion (about US$26.4 billion), with the European Union providing €5 billion (or about US6.6 billion), the World Bank €1 billion (or about US$1.3 billion), and the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and the International Finance Corporation (IFC) a combined €1 billion (or about US$1.3 billion). The Stand-By Arrangement entails exceptional access to IMF resources, amounting to 1,111 percent of Romania’s quota.at the moment
One of the key objectives of the IMF-supported economic program aims to maintain adequate liquidity and strong levels of capital in the banking system.As a result of the global financial crisis, the banks from Central, Eastern and South-Eastern Europe face
Redefining the Role of International Monetary Fund in the Light of the Current Economic (205)
sharply slowing economic growth, tough external financing conditions, higher risk aversion, and a ten liquidity situation [Deutsche Bank Rearch, 2008, 1]. Due to the high ratio of FX-denominated credits (e.g. in the Baltics, Ukraine, Hungary and Romania), the strong FX depreciation reprents an important challenge for the Central, Eastern and South-Eastern European banks. In 2008 and 2009 credit slow down sharply due to the local and foreign funding constraints. The main sources of external bank funding (international bond issuance, syndicated loans, and parental intrabank funding) have declined in the last twelve months.
In the last months the Fund’s traditional Stand-By Arrangement have proved to be more flexible, with fewer conditions than before and tailored to the individual country needs. The high access precautionary Stand-By Arrangements with Central and Eastern European countries approved in the last months are good examples of more flexible IMF lending.
Becau the sources of the crisis are mainly exogenous for the developing economies and their impact is very profound, the IMF should create new facilities or rethink the condi-tionalities of the existing facilities.never say goodbye歌词
In octomber 2008, the International Monetary Fund approved the creation of the Short-Term Liquidity
Facility(SLF) dedicated to strong-performing members countries which are facing temporary liquidity issues in capital markets. According to the IMF, the purpo of this decision is to establish a “facility through which large, upfront, quick-disbursing short-term financing, using existing IMF resources, can be provided to countries with strong policies and a good track record, but which are facing temporary liquidity prob-lems arising from developments in external capital markets” [“IMF Creates Short-Term Liquidity Facility for Market-Access Countries”, 2008]. Several features of SLF – such as its capped access and short repayment period, as well as the inability to u it on a precau-tionary basis-limited its ufulness to potential borrowers and thus the SLF have been canceled in 2009.
The lack of a sufficiently large and attractive precautionary facility in the IMF’s lend-ing framework has been considered a major weakness in the global financial system. In order to address this issue, the IMF has established in March 2009 a new facility - Flexible Credit Line (FCL), which grants access to large amounts of rapid financing for emerging market economies with sound policies that are well integrated to global financial markets and that are facing contagion from external events outside their control. Once a country has been approved for the IMF’S FCL, disburments are not phad or conditioned to under-take pre-agreed policy measures or meet policy targets. The access to this new credit line is particularly uful for crisis prevention purpos. To date, Colombia, Mexico,
and Poland have been provided credits totaling US$ 78 billion. This new facility is considered to be “the biggest change in how the IMF interacts with its members since the end of Bretton Woods” [Lipsky, 2009, 30].
Comparing with Short-Term Liquidity Facility (SLF), the FCL is more flexible in many ways. According to the IMF, the FCL’s flexibility includes:
•assuring qualified countries of large and upfront access to Fund resources with no on-going (ex post) conditions;
•renewable credit line, which at the country’s discretion could initially be for either a six-month period, or a 12-month period with a review of eligibility after six months; •longer repayment period (3¼ to 5 years versus maximum rollover period of 9 months in the SLF);
206 Gheorghe VOINEA, Sorin Gabriel ANTON
•no hard cap on access to Fund resources, which will be assd on a ca-by-ca ba-sis (the SLF had a cap on access of 500 percent of quota); and
•flexibility to draw at any time on the credit line or to treat it as a precautionary instru-ment (which wa
s not allowed under the SLF) [“IMF Overhauls Lending Framework”, 2009].
Low-income countries may borrow from the IMF at a concessional interest rate through the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks Fa-cility (ESF). As part of the reform package, the IMF has restructured the Exogenous Shocks Facility, which was established in 2006 in order to help low-income countries cope with exoge-nous shocks. As a result, ESF is providing now financial assistance more quickly, in larger amounts and in streamlined conditions to support member countries deal with different events such as commodity price volatility, natural disasters, and conflicts and cris in neighboring countries that disrupt trade.
The Group of Twenty leading economies (G-20) agreed on April 2, 2009 to double money for concessional lending to low-income countries over the next 2 or 3 years. Fur-thermore, the International Monetary Fund has doubled the maximum size of the “normal” loans under the poverty reduction and growth facility (PRGF) and exogenous shocks facility (ESF) in accordance with the size of global shocks hitting the economies.本能2 致命诱惑
Another facility that have been reconsidered is the Compensatory Financing Facility, which was established in 1963 to support member countries cope with temporary export shortfalls caud by ex
ogenous shocks. In the last years this facility has been modified v-eral times by broadening its coverage. Given the very tight conditionalities, this facility has not been ud since the modifications introduced in 2000. In March 2009, the Executive Board of the International Monetary Fund decided to abolish the Compensatory Financing Facility, the Supplemental Rerve Facility, and the Short-Term Liquidity Facility.
3.2. Supplementing the Fund’s resources – condition for combating the current economic
男性祛斑and financial crisis
In the last twelve months, the problems implied by the current financial crisis has led to a rapid increa in the demand for IMF financing. As a conquence, the Group of Twenty leading economies (G-20) agreed on April 2, 2009 to triple the IMF’s regular lend-ing capacity from $250 billion to $750 billion and to double money for concessional lending to low-income countries. There are three different ways to increa the IMF’s lendable re-sources [“How to Increa the IMF’s Lendable Resources”, 2009]:
1)through bilateral borrowing agreements with members;
2)through enlargement of the multilateral New Arrangements to Borrow (NAB);
3)through placing notes in the official ctor. Recently, the Executive Board of the IMF
approved a framework for the issuance of notes to member countries and their central banks. Some developing countries (China, Brazil, and Russia) have already announced their intention to buy new IMF notes for a total of US$70 billion.scene
The global financial stability net will be broadened through a new general allocation of Special Drawing Rights (SDRs) for a total of US$250 billion, that will be distributed among all 186 IMF’s member countries according to their quota. Even if this amount of money is quite small comparing with global liquidity, it may have an important impact on interna-tional rerves for emerging market and low-income countries [Lipsky, 2009, 31].
