Abstract:
Accumulation of reserves by developing countries to avoid
borrowing from the IMF with whose governance and policies they are
dissatisfied helped developing countries cope with the 2008 financial
crisis. But it is argued that it was bad for the world economy. The need
for reforms is accepted but the agreed reforms have not been
implemented.
The Fund has given priority to external balance at the expense of
domestic full employment contrary to the objective of Keynes and White.
Also the lack of sharing of adjustment between deficit and surplus
countries, as desired by Keynes, has imparted a deflationary bias to
policies.
Developing countries have established facilities to provide
additional BOP financing to their members. Though the amounts
available under these schemes are substantial they would be insufficient
in a crisis. Also the scheme do not indicate any new model of BOP
adjustment. These schemes are no challenge to the hegemony of the
Bretton woods institutions. They, however, are a small beginning and
may be a pointer of things to come.
