Saturday, September 12, 2009

IMF Exceeds G-20 Expectations


The G-20 Finance Ministers and Central Bank Governors met this weekend in London prior to the Pittsburgh Summit. The purpose of the preliminary meeting was to assess their progress in recovery measures decided on at earlier summits and to establish further actions to sustain economic growth. How are they doing? Dominique Strauss-Kahn, head of the International Marketing Fund (IMF), said that that the IMF has not only progressed but also surpassed the expectations of the G-20 saying, “The IMF delivered everything, and even more.”

In April, the G-20 leaders agreed to triple of the IMF resources to $750 billion in an effort to prevent further fallout from the global crisis. The IMF has seen an additional $500 billion according to Strauss-Kahn. The G-20 also required $250 billion to be allocated to the Special Drawing Right (SDR), the IMF’s version of currency. That allocation was made on August 28 with an additional $33 billion expected to be allocated on September 9. The G-20 also asked for $6 billion for low-income countries over the next 2-3 years. Strauss-Kahn reports that the IMF will be able to lend $8 billion during that time frame and $17 billion through 2015 at zero interest at least until 2011. Further considerations of the G-20 concerned the governance of the IMF.

The G-20 recognizes that the IMF should remain a quota-based organization, meaning that a country’s representation should be based on that country’s weight in the global economy; however, as part of the reforms the voice of the emerging and developing economies, including the poorest, should be increased to reflect changes in the world economy. The G-20 is committed to increasing accountability, strengthening the involvement of Fund Governors in strategic oversight, and agreed to move to an open, transparent, and merit-based selection of IFI management.

Discussion Questions:
1. Should the poorest emerging and developing nations have a larger voice in the actions of the IMF?
2. If so, should these economies have other responsibilities to make their voices more viable in the governance of the IMF?

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