Restructuring IMF Facilities to Separate Lender of Last Resort and Conditionality Programs: The Meltzer Commission Recommendations as Complements rather than Substitutes

Abstract

What happened to the push for reform of the international financial architecture that had such momentum during the rash of international financial crisis in the 1990s?. While not the stuff of dramatic news headlines, a great deal of progress has been made, especially in the areas of increased transparency at the IMF and the growing acknowledgement of the danger of trying to run stickily pegged exchange rate regime in a world of substantial international capital mobility. Less progress has been made, however, in dealing with another implication of high capital mobility – the need for the IMF (or some other international agent) to have a more effective capability to act as an international quasi lender of last resort (LOLR). In response to the recent crisis, the international community has created two new financing mechanisms within the IMF. One, the Supplemental Reserve Facility (SRF), has been quite useful but does not go far enough in the direction of a LOLR. The more radical Contingent Credit Line (CCL) has serious design problems and hasn’t yet been used.

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