The global financial crisis that erupted in 1997 affecting the "Asian Tigers" economies and quickly reverberating globally set the stage for the first genuine debate in several decades over the role of the International Monetary Fund (IMF). Moreover, this debate has placed a spotlight on an ongoing debate among academics and developing-country policy-makers about the impact of IMF involvement in developing-country policy formulation. Developing countries turn to the IMF for financial assistance in times of foreign-exchange shortfalls. While they receive this assistance, in accordance with the IMF Articles of Agreement, they are often called upon as a precondition of this assistance to undertake economic reforms proposed by IMF staff. These reforms are in principle designed to speed the developing country's departure from its shortfall position. Critics have recently claimed, however, that these reforms have in fact worsened the plight of the borrowing country and brought nearer the date of the next shortfall.1( The Economist 1997, Feldstein 1998, Rosett 1999, and Sachs 1997).
At one extreme is a position taken by conservatives like George Schultz (a former.
U.S. Treasury Secretary) who proposes the abolition of the IMF on the ground that its.
crisis lending operations generate an unacceptable degree of moral hazard for the private.
financial system as well as for sovereign borrowers (Thacker, 1999, 45). In the same camp are abolitionists on the far left of the political spectrum who regard the IMF as the modern-day replacement of 18 th century "gun-boat" diplomacy. They are convinced that the IMF serves the imperialist designs of its principal shareholders, and imposes harsh conditionalities on the.
populations of poor countries to ensure the servicing of debts owed to creditor governments and financial institutions in the advanced capitalist countries. Others with a less hostile orientation advocate the merging of the IMF into the World Bank (WB) Group.
