IMF was set up in the closing stages of World War II, Half a century has passed since then. The environment, economic status of dominant member states and world economic order in which it was set up initially has dramatically changed. The new economic order needs all the institutes and organization to align and adapt to the new purpose. The need of the day is IMF be strong.
He who rejects change is the architect of decay. The only human institution which rejects progress is the cemetery
What does it Mean? WHY?
A stronger IMF will help provide the strong, credible, and transparent macroeconomic frameworks to provide the foundations of to stable and fulfilling world economy. It will also help to implement fair international codes with greater transparency. The availability of funds with the debated, accepted and morally justified democratically approved conditions with help eradicate the poverty, diseases and unhappiness of less fortunate public of the world.
Have jotted down few points… If you feel there are others do join in to point out.
Avoiding another global Economic Crisis– It is well known that IMF releases the funds attached with the conditions. In the past this has been debated too much and has been often in news for political reasons related to moral hazards, transparency, undermining economic performance in long run etc. However, my feeling is attaching conditions with the release of the funds is a good way of controlling economic failures. Off-course the conditions should be conducive to economic growth of region, transparent and aligned to interest of the people of the land. It should create win win situations
A new Financial system by IMF Currency– One of most talked about advantages of stronger IMF is to float an new currency. In the current state of affairs, IMF issues the SDR’s, as the in the recent G20 meet the members aggreed to float $ 250 b worth of SDR. However, the amount is too small as compared to Forex reserves held by developing countries. Also the SDR itself is derivative of US $, € Euro, £ pound and Yen. A stronger IMF may lead to new international currency with proper reference and weight-age to currencies other than $ and £ or may be to Gold.
The countries having huge reserves of forex will be benefited for removing risk to crash of US $.
Internationalisation of Financial Systems- Till date the IMF image is of pro developed nations, Asian countries in particular have preferred to rely on rainy-day funds they accumulate themselves, rather than borrowing from the fund. A better participated, balanced IMF will help internationalisation of Financial systems. For instance, China with 2nd largerst GDP and fastest growing economy in abosolute terms, now has about 3% of the voting rights, far behind the United States, which holds over 16%, giving it de facto veto power on all major decisions. The Rwanda group, representing 24 Subsaharan African countries and some 225 million people, holds 1.39 % of the voting rights. The IMF needs to have a better structure to represent the changing world order in financial systems.
This seems to overly simplistic in words, but extremely difficult to execute. Fear of losing economic leadership or inability to control results amounting from structural changes in one of the largest financial institutions may make the dominant members of IMF delay or avoid the change. But I guess they need to learn from British Prime Minister