IMF reforms will contribute to strengthening of the international financial system

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After financial crises erupted in emerging markets during the 1990s and spilled over to other countries, the international community took steps to make the world less vulnerable to crises. Nonetheless, it is clear that its work is far from complete. Improving the prevention and management of crises means tackling sources of vulnerability, increasing transparency, and adhering to international standards of good economic citizenship. The IMF, the private sector, and governments all have a role to play.

Over the past decade, the IMF has made a number of changes in the way it operates. It has become increasingly open and candid about its policies and operations and has encouraged its member countries to publish information about their economic and financial polices and practices. This greater openness promotes the orderly and efficient functioning of financial markets, reduces the likelihood of shocks, and makes policymakers more accountable for their actions.

IMF reforms

In addition to building on the reforms it has initiated over the past several years, the IMF has rationalized and reformed its lending to focus on crisis prevention and to ensure that its funds are used more effectively.

It has made the terms of the Contingent Credit Lines (CCL) Facility (see section on financial facilities) more attractive to potential users. It has approved measures to discourage excessive use of IMF resources by charging higher interest rates on large use of resources, as well as to encourage members to repay their IMF financing ahead of schedule. The IMF is also planning to streamline and focus conditionality by attaching fewer conditions to its financing (see section on conditionality).

Programs should take adequate account of national decision-making processses and be founded on strong country "ownership" of the economic strategies supported by the IMF. The objective would be to provide maximum scope for countries to make their own policy choices while ensuring that the IMF's financing supports the necessary policy adjustments and while safeguarding IMF resources.

Focus on crisis prevention

The IMF has developed standards and codes in its main areas of responsibility (see section on standards and codes) and introduced a program of reports on countries' observance of standards and codes (ROSCs) that evaluate their economic and financial practices relative to international standards.Meeting...