THE UNIVERSITY OF CAMBODIA

COLLEGE OF SOCIAL SCIENCES

Mid-term Undergraduate Centralized Examination
Geopolitics and Globalization INT104
Lecture: HOK LY, Session Morning, Room, Scores: ____
Student’s name: PAI SOKPHANHA, ID 60181592, Academic Year 2020-2021 Term 4

Midterm
Topic: International Monitory Fund (IMF) is running its roles around the world. Please find out the
nature of IMF. such as how it is formed, what is its vision, mission and strategy; and then discuss how
IMF’s role relate to geopolitics in the context of globalization.
The nature of IMF and how if formed
The International Monetary Fund (IMF) is an organization of 190 countries, working to foster global
monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world. Created in 1945,
the IMF is governed by and accountable to the 190 countries that make up its near-global
membership. The IMF's primary purpose is to ensure the stability of the international monetary
system—the system of exchange rates and international payments that enables countries (and their
citizens) to transact with each other. The Fund's mandate was updated in 2012 to include all
macroeconomic and financial sector issues that bear on global stability.
Executive Directors and Voting Power of IMF
24 Directors each representing a single country or groups of countries. The Executive Board (the
Board) is responsible for conducting the day-to-day business of the IMF. It is composed of 24
Directors, who are elected by member countries or by groups of
Senior Officials
Managing Director (Kristalina Georgieva)
First Deputy Managing Director (Geoffrey W.S. Okamoto)
Deputy Managing Director (Antoinette Sayeh)
Deputy Managing Director (Mitsuhiro Furusawa)
Deputy Managing Director (Tao Zhang)
Economic Counsellor and Research Department Director (Gita Gopinath)
Financial Counsellor and Monetary and Capital Markets Department Director (Tobias Adrian)
African Department Director (Abebe Aemro Selassie)
Asia and Pacific Department Director (Changyong Rhee)
European Department Director (Alfred Kammer)
Communications Department Director (Gerard Rice)
Corporate Services and Facilities Department Director (Jennifer Lester)
Finance Department Director (Andrew Tweedie)
Fiscal Affairs Department Director (Vitor Gaspar)
Human Resources Department Director (Kalpana Kochhar)
Institute for Capacity Development Director (Sharmini A. Coorey)
Legal Department General Counsel and Director (Rhoda Weeks-Brown)
Middle East and Central Asia Department Director (Jihad Azour)
Secretary of the Fund and Secretary’s Department Director (Ceda Ogada)
Statistics Department Chief Statistician and Data Officer and Director (Louis Marc Ducharme)
Strategy, Policy, and Review Department Director (Ceyla Pazarbasioglu)
Chief Information Officer and Information Technology Department Director (Edward C. Anderson)
Western Hemisphere Department Director (Alejandro Werner)
Office of Budget and Planning Director (Michele Shannon)
Office of Internal Audit and Inspection Director (Nancy Asiko Onyango)
Investment Office Director (Derek L. Bills)
Regional Office for Asia and the Pacific Director (Chikahisa Sumi)
Offices in Europe Director (Ashok Bhatia)
Special Representative to the UN (Robert Powell)
Independent Evaluation Office Director (Charles Collyns)
Organization
The IMF has a management team and 17 departments that carry out its country, policy, analytical, and
technical work. One department is charged with managing the IMF’s resources. This section also
explains where the IMF gets its resources and how they are used.

 Management: the IMF has a Managing Director, who is head of the staff and Chairperson of
the Executive Board. The Managing Director is appointed by the Executive Board for a
renewable term of five years and is assisted by a First Deputy Managing Director and three
Deputy Managing Directors.
 Staff: the IMF’s employees come from all over the world; they are responsible to the IMF and
not to the authorities of the countries of which they are citizens. The IMF staff is organized
mainly into area; functional; and information, liaison, and support responsibilities.
 IMF Resources: Most resources for IMF loans are provided by member countries, primarily
through their payment of quotas.
 Quotas: Quota subscriptions are a central component of the IMF’s financial resources. Each
member country of the IMF is assigned a quota, based broadly on its relative position in the
world economy.
  Special Drawing Rights (SDR): The SDR is an international reserve asset, created by the IMF
in 1969 to supplement its member countries’ official reserves.
 Gold: Gold remains an important asset in the reserve holdings of several countries, and the
IMF is still one of the world’s largest official holders of gold.
 Borrowing Arrangements: while quota subscriptions of member countries are the IMF's main
source of financing, the Fund can supplement its quota resources through borrowing if it
believes that they might fall short of members' needs.
Articles of Agreement
The Articles of Agreement of the International Monetary Fund were adopted at the United Nations
Monetary and Financial Conference (Bretton Woods, New Hampshire) on July 22, 1944. They were
originally accepted by 29 countries and since then have been signed and ratified by a total of 190
Member countries. As the charter of the organization, the Articles lay out the Fund's purposes, which
include the promotion of 'international monetary cooperation through a permanent institution which
provides the machinery for consultation and collaboration on international monetary problems'. The
Articles also establish the mandate of the Organization and its members' rights and obligations, its
governance structure and roles of its organs, and lays out various rules of operations including those
related to the conduct of its operations and transactions regarding the Special Drawing Rights. The
key functions of the IMF are the surveillance of the international monetary system and the monitoring
of members' economic and financial policies, the provision of Fund resources to member countries in
need, and the delivery of technical assistance and financial services. Since their adoption in 1944, the
Articles of Agreement have been amended seven times, with the latest amendment adopted on
December 15, 2010 (effective January 26, 2016). The Articles are complemented by the By-laws of
the Fund adopted by the Board of Governors, themselves being supplemented by the Rules and
Regulations adopted by the Executive Board.
IMF at a Glance
The International Monetary Fund, or IMF, promotes international financial stability and monetary
cooperation. It also facilitates international trade, promotes employment and sustainable economic
growth, and helps to reduce global poverty. The IMF is governed by and accountable to its 190
member countries

 Founding and mission: The IMF was conceived in July 1944 at the United Nations Bretton
Woods Conference in New Hampshire, United States. The 44 countries in attendance sought
to build a framework for international economic cooperation and avoid repeating the
competitive currency devaluations that contributed to the Great Depression of the 1930s. The
IMF's primary mission is to ensure the stability of the international monetary system—the
system of exchange rates and international payments that enables countries and their citizens
to transact with each other
 Surveillance: In order to maintain stability and prevent crises in the international monetary
system, the IMF monitors member country policies as well as national, regional, and global
economic and financial developments through a formal system known as surveillance. The
IMF provides advice to member countries and promotes policies designed to foster economic
stability, reduce vulnerability to economic and financial crises, and raise living standards. It
also provides periodic assessments of global prospects in its World Economic Outlook, of
financial markets in its Global Financial Stability Report, of public finance developments in
its Fiscal Monitor, and of external positions of the largest economies in its External Sector
Report, in addition to a series of regional economic outlooks
 Financial assistance: Providing loans to member countries that are experiencing actual or
potential balance-of-payments problems is a core responsibility of the IMF. Individual
 country adjustment programs are designed in close cooperation with the IMF and are
supported by IMF financing, and ongoing financial support is dependent on effective
implementation of these adjustments. In response to the global economic crisis, in April 2009
the IMF strengthened its lending capacity and approved a major overhaul of its financial
support mechanisms, with additional reforms adopted in subsequent years. These changes
enhanced the IMF’s crisis-prevention toolkit, bolstering its ability to mitigate contagion
during systemic crises and allowing it to better tailor instruments to meet the needs of
individual member countries. Loan resources available to low-income countries were sharply
increased in 2009, while average limits under the IMF’s concessional loan facilities were
doubled. Access limits under the IMF’s non-concessional lending facilities were again
reviewed and increased in 2016, when the effectiveness conditions for the 14th Review were
met (see below). In addition, zero interest rates on concessional loans were extended through
End-June 2019, and the interest rate on emergency financing is permanently set at zero.
Finally, loan resources tin the amount of SDR 11.4 billion (SDR 0.4 billion above target)
were recently secured to support the IMF’s concessional lending activities well into the next
decade.
 Capacity development: The IMF provides technical assistance and training to help member
countries build better economic institutions and strengthen related human capacities. This
includes, for example, designing and implementing more effective policies for taxation and
administration, expenditure management, monetary and exchange rate policies, banking and
financial system supervision and regulation, legislative frameworks, and economic statistics.
 SDRs: The IMF issues an international reserve asset known as Special Drawing Rights, or
SDRs, that can supplement the official reserves of member countries. Total global allocations
are currently about SDR 204 billion (some $283 billion). IMF members can voluntarily
exchange SDRs for currencies among themselves.
 Resources: Member quotas are the primary source of IMF financial resources. A member’s
quota broadly reflects its size and position in the world economy. The IMF regularly conducts
general reviews of quotas. The lastest review (the 14thReview) was concluded in 2010 and
the quota increases became effective in 2016. This review doubled quota resources to SDR
477 billion (about US$661 billion). In addition, credit arrangements between the IMF and a
group of members and institutions provide supplementary resources of up to about SDR 182
billion ($253 billion), and are the main backstop to quotas. As a third line of defense, member
countries have also committed resources to the IMF through bilateral borrowing agreements,
totaling about SDR 317 billion ($440 billion).
 Governance and organization: The IMF is accountable to its member country governments.
At the top of its organizational structure is the Board of Governors, consisting of one
governor and one alternate governor from each member country, usually the top officials
from the central bank or finance ministry. The Board of Governors meets once a year at the
IMF–World Bank Annual Meetings. Twenty-four of the governors serve on the International
Monetary and Financial Committee, or IMFC, which advises the IMF's Executive Board on
the supervision and management of the international monetary and financial system. The day-
to-day work of the IMF is overseen by its 24-member Executive Board, which represents the
entire membership and supported by IMF staff. The Managing Director is the head of the IMF
staff and Chair of the Executive Board and is assisted by four Deputy Managing Directors.
1. Membership: 190 countries.
2. Headquarters: Washington, D.C.
3. Executive Board: 24 Directors
4. Staff: Approximately 2,700 from 150 countries
5. Total quotas: SDR 477 billion (US$661 billion)
6. Borrowed resources envelope: SDR 500 billion (US$693 billion)
 7. Committed amounts under current lending arrangements: SDR 152 billion (US$210 billion),
of which SDR 96 billion (US$133 billion) has not been drawn.
8. The largest borrowers: Argentina, Ukraine, Greece, Egypt
9. The largest precautionary loans: Mexico, Colombia, Morocco
10. Surveillance consultations: 132 consultations in 2014, 124 in 2015 and 132 in 2016.
11. Capacity development spending: US$332 million in FY2016, over a quarter of the IMF's total
budget
12. Primary aims:
 Promote international monetary cooperation;
 Facilitate the expansion and balanced growth of international trade;
 Promote exchange stability;
 Assist in the establishment of a multilateral system of payments; and
 Make resources available (with adequate safeguards) to members experiencing balance-of-
payments difficulties
IMF Quota and Governance Publications

 Acceptances of the Proposed Amendment of the Articles of Agreement on Reform of the

Executive Board and Consents to 2010 Quota Increase
 Press Release: IMF Executive Board Approves Major Overhaul of Quotas and Governance
 Press Release: IMF Board of Governors Adopts Quota and Voice Reforms by Large Margin
 Reform of IMF Quotas and Voice: Responding to Changes in the Global Economy
 Reforming the IMF's Governance
 IMF Members' Quotas and Voting Power, and IMF Board of Governors
 IMF Executive Directors and Voting Power
 Articles of Agreement of the International Monetary Fund
Executive Board Calendar
The Executive Board (the Board) is responsible for conducting the day-to-day business of the IMF. It
is composed of 24 Directors, who are elected by member countries or by groups of countries, and the
Managing Director, who serves as its Chairman. The Board usually meets several times each week. It
carries out its work largely on the basis of papers prepared by IMF management and staff.
The vision, mission and strategy of IMF
The IMF serves as a global hub for knowledge on economic and financial issues. Over the last seven
decades, it has developed world-leading expertise and a repository of experience on what policies
work, why they unleash growth and how best to implement them. Informed by its experience gained
across diverse countries at varying stages of their development, the IMF shares this knowledge with
member countries through hands-on advice, training and peer-to-peer learning. This in turn helps
governments modernize their economic policies and institutions. The IMF’s capacity development
work is part of its core mandate — along with tracking global economic developments and lending to
countries that experience balance of payment crises. This knowledge sharing work focuses on the
following areas. Better economic policies help individuals and businesses thrive. The IMF’s efforts
help governments and their staff gain the tools and confidence they need to build and implement
modern policies that ensure long-term stability and spur growth.
Public Finances Advise governments on how to raise revenues and effectively manage expenditure,
including tax and customs policies, budget formulation, domestic and foreign debt, and social safety
nets. This enables governments to provide better public services such as schools, roads and hospitals.
For instance: Liberia reached out to the IMF to help establish a modern tax structure to raise revenues
and finance essential public services. The IMF helped strengthen Liberia’s audit and taxpayer
services, and supported the establishment of the Liberia Revenue Authority to better endure the Ebola
crisis in 2014.
The IMF’s areas of expertise in fiscal management include:

 Tax policy
 Tax and customs administration
 Expenditure policy
 Budget formulation
 Public financial management
 Fiscal policy and institutional frameworks
 FAD Technical Assistance brochure
 Revenue Mobilization Fund
 Managing Natural Resource Wealth Fund
 Tax Administration Diagnostic Assessment Tool (TADAT)
 IMF’s Public Financial Management Blog
 Public Investment Management
 Revenue Administration Fiscal Information Tool
 Fiscal Analysis of Resource Industries
 Fiscal Transparency Evaluations
 Monetary and Financial Systems
 Legislative Frameworks
 Statistics
 Macroeconomic Frameworks.
The IMF serves as a global hub for knowledge on economic and financial issues. It shares this
knowledge with government institutions such as finance ministries and central banks in different
forms. This ranges from support on a policy issue — e.g. helping Liberia establish a more modern and
professional tax administration — to holistic capacity development, which may include providing a
resident specialist based in-country – e.g. working with Myanmar to provide a broad range of fiscal,
monetary, legal and statistical support. Regional Capacity Development Centers CD Centers A global
network of regional capacity development centers (RCDCs) and training programs help to implement
the IMF’s mandate to deliver capacity development services to its member countries through
knowledge sharing. A regional approach facilitates an enhanced ability to respond quickly to a
country’s emerging needs, as well as closer coordination with other development partners on the
ground. It also fosters regional integration and allows for better tailoring of advice and training,
helping countries advance towards the Sustainable Development Goals. Activities are complemented
by global thematic funds focused on topical areas. These locally-based regional centers anchor IMF
support for knowledge sharing and are financed jointly by the IMF, external development partners,
and member countries.
This hands-on advice, peer-to-peer learning, and training are delivered to the countries in various
ways:

 IMF staff offer expert advice to country officials both in country and remotely from
headquarters. Such visits are focused on targeted issues and initiated at the request of the
member country; the staff may stay in-country for a short period or be based long-term in an
agency, depending on the country authority’s request.
  A network of the IMF’s regional capacity development centers provides hands-on support to
countries under the guidance of headquarters. These centers foster regional integration, allow
for better tailoring of knowledge sharing to the needs of a region and facilitate an enhanced
ability to respond quickly to emerging needs.
 In-person and online training for government officials on targeted macroeconomic and
financial topics. Online training is also provided to the general public through massive open
online courses in partnership with edX.
The IMF’s knowledge sharing efforts are demand-driven, meaning initiated by our member countries.
Amid global economic challenges and the international community’s commitment to the Sustainable
Development Goals, this demand has increased substantially in recent years. In FY2018, the IMF
provided support to almost the entire membership of 190 countries. The IMF contributes a significant
amount of its own resources to ensure that demand is met. Bilateral and multilateral partners also play
a vital role in meeting this demand, and presently finance about one half of the IMF’s knowledge
sharing efforts. Partners contribute to the IMF’s knowledge sharing work in a variety of ways — via
our global network of regional capacity development centers and thematic funds focused on
specialized areas, or through bilateral programs. Building sound economic institutions and developing
the skills to sustain them is a key priority for fragile states. Two country funds work with South Sudan
and Somalia as they strengthen their operating and technical capacity to make economic and financial
institutions become more effective, transparent, and accountable. The South Sudan Fund was
established in 2012, and the Somalia Fund for Capacity Development in Macroeconomic Policies and
Statistics started operations in February 2015.
IMF Partners

How IMF’s role relate to geopolitics in the context of globalization

1. The world economy is currently undergoing a critical period of adjustment. The engine of global
economic growth over the past ten years—the U.S. economy—is sputtering, and no relief is
forthcoming from economic developments in other regions of the world. On the contrary, in Asia and
in Europe growth is also slowing. It would, nevertheless, be wrong, in my opinion, to lapse into
gloominess. Some slowdown in the U.S. economy was necessary, not least in order to correct
exaggerations in the financial markets. Moreover, in many countries, key economic fundamentals are
stronger today than they were a few years ago. Inflation is not a pressing issue at the moment,
government budgets are comparatively solid, and the international monetary system is in a better
position to respond to pressures thanks to the predominance of flexible exchange rate regimes. Above
all, however, there is sufficient room for maneuver for economic policy to counteract the dangers of a
deeper recession. On that basis the IMF is forecasting global economic growth of above 3 percent for
this year (after 4.8 percent in 2000), which is roughly in line with the average growth rate over the
past two decades.

2. Achieving a growth rate above 3 percent in 2001 will, however, require skillful policy
management. By aggressively lowering interest rates, the U.S. Federal Reserve has appropriately
demonstrated its determination to act, and it has further room for maneuver if necessary. The tax cut
discussed in the United States will also ultimately strengthen consumer and investor confidence. And
while Japan has returned to a zero interest rate policy, more resolute efforts at restructuring the
corporate and banking sectors have still to be made. The tax reforms in Europe have proved
appropriate and timely. However, I would not be happy if the Europeans were to content themselves
merely with achieving a faster growth rate than the United States for the first time in many years. The
IMF staff is likely to revise its growth forecast for Europe down to 2.5 percent for 2001 after 3.3
percent in 2000. Given this outlook, an interest rate cut by the European Central Bank would certainly
help the European economy. However, more ambitious reform efforts are at least as important as
lower rates. Human capital and the technological know-how are clearly available to raise the path of
potential growth from about 2½ percent today to well over 3 percent—an increase that would
significantly lower unemployment, strengthen the euro, and help strengthen the global economy.
3. It is the task of international economic policy to tap the opportunities of globalization, while
limiting its risks. The opportunities it affords are higher productivity, increased trade, stronger growth
dynamics, and more jobs and higher incomes. In my view, globalization also offers a chance to attain
a new awareness of the interdependence of developments all over the world. The risks lie in
overstretching the ability of societies and political structures to adapt, and in financial crises caused as
a consequence of excessive volatility in capital flows. The central problem is, however, the fact that
too many people have so far had no share of the gains in the prosperity that was brought about by
globalization. The successful fight against poverty is, in my view, the key to peace in the 21st century.
4. At the Annual Meetings of the IMF in Prague last year, I gained the overwhelming support of the
IMF's 183 member countries for the Fund to play an active part in the international effort to make
globalization work for the benefit of all. In my opinion, the Fund can fulfill that role best by
refocusing its mandate and by being ready to learn and by accepting new challenges. Given the
structural changes in the world economy, the IMF must focus on promoting international financial
stability as a global public good. This means that the Fund must concentrate its efforts on
macroeconomic stability, on fiscal and monetary policy, and capital markets issues.
5. The main lesson from the financial crises of the past is that crisis prevention must be at the heart of
the Fund's mandate. Much has already been accomplished in this field in recent years. The IMF's
bilateral and multilateral surveillance functions are the main vehicle to pursue this objective through
the regular review and assessment of economic trends and policies at the national and international
level. It is encouraging that most IMF member countries show a genuine interest in an open and frank
surveillance discussion in the Executive Board of the IMF. I regard that as a clear indication that there
is a broader base for the acceptance of globalization than sometimes portrayed in the media. It is my
goal to use the Fund's surveillance discussions as a means to highlight the interdependence between
member countries. Part of this is the recognition that financial crises are not only triggered in
emerging markets but also in the global financial centers of industrial countries. Likewise, money
laundering activities almost always involve the world's major financial centers.
6. The IMF and other institutions have done much in the past two or three years to increase the
transparency of economic and financial data. Economic agents today enjoy much broader access to
information for decision-making. While increased transparency does not, as such, prevent wrong
decisions, it makes the repetition of a crisis like it unfolded in Korea in late 1997 fairly unlikely. An
important area in which much remains to be improved, in my opinion, is the early detection of
vulnerabilities and signs of potential crises, and the development of practical economic policy
approaches to counter those developments.
7.Transparency can also rightly be demanded of the IMF itself, and the institution aims to live up to
this standard. Currently, almost all country- and policy-related Board papers are published, unless a
member country expressly opposes publication or a paper contains market-sensitive data. Recently,
we published a paper on the IMF's website that reviewed Fund conditionality and have invited
comments on it. In addition, during the course of this year, an independent Evaluation Office will
begin assessing the work of the IMF. It will evaluate Fund policy and operations without any
interference from management or staff. I expect this to enhance the effectiveness and credibility of the
Fund's work.
8. Another important vehicle to enhance crisis prevention is the IMF's work on the elaboration and
dissemination of standards and codes for sound economic and financial policies and corporate
governance. Much has been achieved already in this regard. We must continue to work patiently but
persistently to convince developing and emerging market countries not to interpret these standards
primarily as a "dictate" by the industrialized countries but rather to see them as useful guide posts in
their own efforts to strengthen institutions and gain greater access to international investment capital.
9.We recently witnessed in Turkey how a public dispute between leading politicians can unleash a
financial crisis. I do not accept that in globalization capital markets have taken the place of politics.
But politicians must nevertheless recognize that, in open economies, political stability is a key factor
for investor confidence. In the case of Turkey, the restructuring of the banking sector, especially the
state-owned banks, lies at the core of resolving the current financial crisis. In retrospect, I wish that
Turkey had participated in the pilot Financial Sector Assessment Program (FSAP) that the IMF and
World Bank jointly developed after the Asian crisis. The FSAP gathers and analyzes detailed
information on the strengths and weaknesses of the financial systems in member countries. So far,
FSAP assessments have been conducted in 24 countries, and the Executive Boards of the IMF and the
World Bank have already taken the decision to extend the program in 2001 to cover 30 more. This is a
very ambitious target, which incidentally places considerable demands on the resources of both
institutions. However, I consider this program an important means to strengthen the stability of the
international financial system by reinforcing its foundations. In that context, special priority must be
attached to the assessment of financial sectors of countries with systemic importance for the stability
of the international financial system.
10. In particular, the development of capital markets has dramatically altered the global economy over
the past 20 years. In both volume and sophistication, private capital flows have by far overtaken
official flows. Progress toward prosperity for all will only be possible with a policy of constructively
working with—rather than against—the private sector. Both economic theory and policy application
are clearly lagging behind developments in financial markets. This is also an area where the IMF itself
needs to catch up. I have made a start on this with two decisions. First, we are systematically building
up expertise on capital market issues by establishing an International Capital Markets Department in
the IMF. Second, we are developing a channel for informal but regular dialogue with high-level
representatives of private financial institutions. This dialogue is aimed in particular at engaging the
private sector more closely and from the outset in crisis prevention. I also believe that such systematic
dialogue can help build a financial culture which is oriented towards sustainable value creation, and
helps mobilize forces within the private sector that countervail "irrational exuberance" (Alan
Greenspan). In the end, it is however also necessary for the IMF to be in a position to make well
founded judgments regarding the appropriate regulation of international capital markets. The further
liberalization of capital flows remains an important goal. However, progress in this regard, has to
draw on the experience gained in the past. That means, in my view, that capital account liberalization
must be carefully sequenced, in terms of timing and degree, with the development of a sound financial
sector, including of adequate regulatory and monitoring frameworks.
11. The Asian crisis was a combination of over-investment, and banking and currency crises.
Research by the IMF indicates that no single type of exchange rate regime is appropriate for all
countries in all circumstances. It is quite striking, however, that financial crises have invariably been
linked, directly or indirectly, with fixed exchange rates. Fixed exchange rate regimes, in combination
with insufficiently regulated and supervised banking systems, allow the buildup of speculative
bubbles. That is why the IMF regards a flexible exchange rate regime as a better and safer option,
particularly for emerging market countries. Such a regime can function as a safety valve in the event
of economic policy slippages. A currency board, if accompanied by disciplined economic policies,
may be an option in certain circumstances—above all to break the back of stubbornly high inflation. I
also believe that the European experience with economic and monetary integration may hold lessons
for other regions of the world on how economic and monetary stability can be secured. In any event,
exchange rate regime and exchange rate policy issues must be at the core of the IMF's advisory
expertise.
12. However much effort goes into crisis prevention, crises cannot be completely ruled out in an open
and dynamic global economy. The IMF therefore needs to be and remain an efficient "firefighter".
This presupposes the availability of sufficient financial resources and adequate instruments for their
use. However, it is also true that the IMF is not, and should not be, in a position to match the volumes
of private capital markets. Debtors and private creditors must always be aware that the IMF's financial
assistance is not there to relieve them of their responsibility for the risks they take. The IMF is not an
international lender of last resort, in the sense of providing unlimited liquidity. Such a notion would
undoubtedly exacerbate the moral hazard problem. In order to limit moral hazard in the current
system and to bring about equitable burden-sharing, we must engage the private sector in crisis
resolution efforts. Substantial progress has been made in this area in the past few months. However,
the discussion is far from concluded. In addition to the steps already outlined, the IMF amended its
lending facilities in 2000, in order to discourage the extended use of Fund credit, and to be in a
position to respond adequately to a sudden loss of market confidence and to contagion effects. (SRF,
CCL)
13. Another important reform effort at the IMF concerns the conditionality attached to Fund lending.
Conditionality remains essential to protect the Fund's resources and to promote the needed adjustment
processes. However, in the past, conditionality sometimes became too extensive and, in some
structural areas, ventured into areas outside the expertise of the Fund. I consider it very important that
countries reaching an agreement with the Fund "own" the reforms themselves. In this context, less can
be more if it strengthens country ownership and contributes to a sustained implementation of needed
reforms. In my experience, it is often not a lack of political will that hinders reform, but rather the
lack of know-how. Therefore, we must pay even more attention in future to providing efficient
technical assistance and to building efficient administrative structures in the developing countries.
14. Globalization requires a policy concept for one world. In my talks in developing countries, not
least in Africa, I was told quite clearly—and not just by government representatives—that the IMF's
involvement is welcome and that its advice and expertise are sought after, naturally along with its
concessional loans under the Poverty Reduction and Growth Facility (PRGF). The demand by some
that the IMF should withdraw from poor countries has not been thought through. Such a move would
further a division of the world, whereas global partnership and cooperation is what is urgently needed.
Those to whom I spoke in Africa confirmed in particular that the new concept of the World Bank and
IMF cooperating to support comprehensive poverty reduction strategies developed by the countries
themselves is beginning to bear fruit. There is increasing awareness that success in poverty reduction
must rest on two pillars: First, resolute efforts by the countries themselves to address the home-grown
causes of poverty. This involves above all good governance, respect for the rule of law, an end to
armed conflicts, and the fight against corruption. The second pillar consists of more decisive, faster,
and more comprehensive support from the international community.
15. Debt relief clearly must form part of a comprehensive concept for poverty reduction. The IMF and
the World Bank brought 22 countries to the Decision Point under the Enhanced HIPC Initiative by the
end last year—an enormous effort on the part of all involved. As a result, the total external debt of
those countries will be reduced to one-third. I also welcome the decisions by a number of G7
countries to forgive 100 percent of bilateral claims in the context of the HIPC Initiative. However,
debt relief should not be viewed as a panacea. Credit is and remains an indispensable element for
economic development. Credit must, however, be based on the confidence that contracts will be
respected. Promotion of such a credit culture is not only essential for development but also for the
stability of the international financial system as a whole.
16.The true test of the credibility of industrial countries' efforts to combat poverty lies, in my view, in
their willingness to open their markets to poor countries' exports and to deliver on their promises of
official development assistance. The governments and parliaments in industrial countries have more
than a moral obligation here. They must, at last, allow developing countries free access to their
markets. It is political and economic madness for OECD countries to spend US$360 billion a year on
agricultural subsidies, while poverty rages in developing countries, especially in the rural and farming
regions. It is also overdue for industrial countries to honor their commitment to provide 0.7 percent of
GNP for official development assistance. Germany's development aid is equivalent to about 0.26
percent of GNP, and thus roughly in line with the average of ODA from all OECD members. I hope
that the discussion about globalization in the German Bundestag will lead to concrete results under
their own responsibility in this area—for instance by legislation that makes the achievement of a level
of ODA of 0.7 percent of GDP within 10 years legally binding

Reference
https://www.imf.org/en/About
https://en.wikipedia.org/wiki/International_Monetary_Fund
https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp040201