Michel Camdessus at the IMF: A Retrospective

• Author: James M. Boughton
• Position: Historian of the IMF

It may be some years until a definitive assessment of Michel Camdessus's unprecedented 13 years as Managing Director can be made. In this article, the IMF's Historian provides a preliminary evaluation.

The story of Michel Camdessus's long tenure as the seventh Managing Director of the IMF and Chairman of its Executive Board is nothing less than the history of the institution over those 13 years. On few issues could he be accused of being a passive observer or of being led by events rather than leading the IMF's response to them. Indeed, it is difficult to tell the story without turning it into a history of the global economy from 1987 to the end of the century.

To be a great leader, one must first be presented with great challenges. For that, Camdessus was blessed with the curse of living in "interesting times." When he arrived at the IMF in January 1987, after a hotly contested election in the Executive Board, he immediately faced four major issues where he believed he had to strengthen the IMF's role: the uncertain state of international monetary cooperation among the large industrial countries, the stalled strategy for resolving the international debt crisis, the seemingly intractable state of arrears to the IMF by several countries, and the deepening poverty in sub-Saharan Africa and other regions. Those first few years-the end of the 1980s-seemed tumultuous enough, but the collapse of international communism and rapid globalization of finance in the 1990s presented even greater challenges.

Overseeing the system

The central and unique role of the IMF is surveillance: that is, to oversee the international financial system and the exchange rate policies of its member countries (which now include virtually all the countries of the world). Camdessus acted to strengthen that role by transforming surveillance into a much more open and transparent process and by developing new internal procedures to give the IMF a clearer and more up-to-date picture of world economic developments. In addition, he helped develop a closer working relationship between the IMF and European countries and institutions during a period of rapid regional change. As the European Community developed into the European Union, created a common currency in the euro, and established the European Central Bank, the IMF welcomed and supported that process. More generally, Camdessus extended and broadened the IMF's capacity to provide technical assistance and policy advice to governments and central banks around the world. Surveillance became a broader cooperative exercise between the IMF and its members, covering not just macroeconomic policies but also structural issues ranging from data quality to the soundness of the banking system.

In the wake of the Asian and Russian crises in 1997 and 1998, respectively, the need for greater stability of international capital flows further deepened the IMF's role in overseeing the system. Under the rubric of redesigning the "architecture" of the international financial system, Camdessus directed the debate toward incremental change.

By the end of 1999, some initiatives were already in place: notably, the Supplemental Reserve Facility, designed to enable the IMF to respond more forcefully to financial crises; the option for countries to apply for Contingent Credit Lines from the IMF, to reassure creditors of the soundness of their economic policies and the strength of their resources; and standards for the timely dissemination of economic data by member countries. Other initiatives to stabilize relations between emerging market countries and international creditors, limit sudden capital outflows and the effects of financial contagion, strengthen countries' financial systems, and promote good governance and transparency in policymaking were under development or being discussed. The continuing central role of the Interim Committee of the Board of Governors was stressed...