IMF in need ‘of reform’
THE INTERNATIONAL MONETARY Fund (IMF) has been described as biased toward European countries and inadequate in managing the global economic system.
According to world-renowned economist Dr Fred Bergsten, even the United States, traditional cheerleader of the Fund, was not unanimous about supporting it.
“Our administration recently made a very strong call to get our Congress to support the latest increase of IMF resources. Congress was unwilling to do it; it didn’t oppose it or vote it down but was unwilling to take it up . . . so even the United States, traditional champion and leader of the IMF, has dropped the ball,” he said.
Bergsten, director emeritus of the Washington-based Peterson Institute, also told the first Caribbean Economic Forum held last week at the Grande Salle, Central Bank, that this had resulted in an international financial system that was devoid of effective management cooperation.
“That’s a strong statement but unfortunately it’s true,” he said, noting that the IMF, which was currently giving technical advice to the Barbados Government, needed a better enforcement mechanism.
He added that a better mechanism was unlikely since the emerging markets and developing countries now accounted for half the world’s economy but a distinct minority of votes on the IMF’s executive.
“So naturally for many of them, the IMF is not a legitimate institution that they want to support. To make that change, the traditional leaders, United States and Europe, have got to voluntarily give up position; the US has been willing to do that at least modestly and its share is now no more than its economic weight, the Europeans have been very resistant to do it even at a time when they’ve become the main borrowers,” he explained.
Bergsten said the Europeans therefore wanted to maintain a dominant role in how IMF money was used. “In other words, lending to themselves. It’s simply not viable and leads to legitimate charges that the Fund is biased in favour of the Europeans . . . so the whole thing deteriorates,” he added.
He noted, however, that the IMF was still useful and had played an essential role in the eurozone crisis and in other countries.
“But as far as a manager of the global system, it is woefully inadequate at the moment. Given that state of disarray that I described, frankly there’s not much prospect to improving it significantly.”