Cape Town - Finance Minister Trevor Manuel has welcomed an International Monetary Fund (IMF) announcement that it would overhaul its lending structure - a development that would benefit emerging markets amid the global economic crisis.
Manuel said South Africa did not need benefits from the overhaul, but it would be useful for developing countries which had experienced "disproportionately large" effects stemming from the financial crisis.
The IMF's plan, which is in step with an overall reform of the institution, is to establish what it terms the Flexible Credit Line (FCL). Countries with strong economic fundamentals and a good record of fiscal management, policies and policy implementation would qualify for the FCL.
Said Manuel: "We recognise that this facility will assist many more countries to deal with the challenges they face, and in the process ensure a more co-ordinated response to the global economic crisis."
The FCL provides for large, upfront financing on a precautionary basis and more appropriate tailoring of conditions to countries' varying strengths and circumstances, the IMF said.
The move is geared to making the IMF more sensitive to the needs of more emergent and developing markets. But it also comes at a time when developing economies have experienced large capital outflows, falling prices for primary commodities, a sharp contraction of exports and declining remittances.
Manuel behind IMF reform
The IMF?s overhaul is aimed at improving trust among the world?s developing economies following two decades of ?structural adjustment? policy.
Manuel, who has been an ardent campaigner for IMF reform, was chosen last September to chair an IMF committee tasked with formulating plans to ?bring it [the organisation] back to the centre of the world economy?.
In a letter to IMF managing director, Domininque Strauss-Khan, Manuel said how out of touch the IMF had become with emerging markets.
?The funds ability to relate effectively to many of the countries that need its help ? whether temporary or otherwise ? needs work,? Manuel said in the letter.
That was because the relationship between the fund and its membership, as reflected in the Fund?s governance structure, had ?? not kept pace with changes to the distribution of economic activity in the world economy, he wrote.
Other proposals developed by Manuel?s IMF reform committee included forming a high-level ministerial council to foster political engagement in strategic and critical decisions, and a review of the fund?s decision-making rules.
- Fin24.com