October 04, 2009
Negotiating The New IMF
Posted by David Zaring

The IMF is supposed to do two things in the new international financial architecture regime.  It is supposed to be the eyes and ears of the G-20 on matters of systemic instability.  And it is supposed to serve as a lender of last resort - admittedly a penurious one - for countries on the brink of default. 

The problem is that these jobs have always, in theory, been duties the IMF has had.  So financial reform for that particular international institution is not about making it different, but rather about making it better (and possibly about tying it to the G-20 a bit more closely than it was tied to the G-7).  Part of that is about giving it a dollop more money - not enough to make it a real backstop, but maybe enough to deal with Pakistan, Iceland, and someone else at once.

So, of course, there's talk of a reorg, perhaps a richly deserved reorg, but one that, in Tim Geithner's view, should always be paired with commensurate reevaluation of the contributions of the emerging markets.  Hence, I think, this part of his speech for the big IMF meeting in Istanbul:

Reform of the Executive Board remains an essential component to modernizing the IMF's governance structure to better reflect the 21st century global economy.  The United States has called for reducing the size of the Board while preserving the existing number of emerging market and developing country chairs.  Further, the past six months have plainly demonstrated the benefits of securing stronger Ministerial engagement in setting strategic policies and priorities of the International Financial Institutions. 

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