ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Beyond the IMF

A consensus has developed that the International Monetary Fund is not fulfilling its role prompting multiple proposals for reform. However, the focus on reform should be complemented with an exploration of alternatives outside the IMF, which hold the potential to give developing countries greater bargaining leverage with the Fund, and by increasing competition so as to spur the institution to better performance. This paper focuses on the insurance role of the Fund and argues that developing countries are turning to alternative insurance mechanisms - from a higher level of reserves, to regional co-insurance facilities, to remittances - as a counter-cyclical source of foreign exchange. The de facto exit of the IMF's clientele driven by the high political costs associated with Fund borrowing, now poses unprecedented challenges, in particular pressures on the Fund's income. In order to maintain its role as an insurance mechanism, the IMF needs to undergo a rapid restructuring and significantly cut its administrative budget, with the budget savings used to lower the interest rates charged to borrowers.

Beyond the IMF

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