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Reforming the Global Financial Architecture

image of Reforming the Global Financial Architecture

A report prepared for the 1999 Commonwealth Finance Ministers Meeting, discussing the reform of international financial architecture. It argues that contemporary crises are very different from traditional balance of payments problems, and that developing countries are especially vulnerable. Six areas of discussion have been identified, some well known, others involving new initiatives. The report also identifies issues in the area of crisis resolution. It looks at the role of the Fund; incentives for the private sector; measures to deal with imprudent creditors and the design of adjustment programmes. It concludes by proposing a new governance structure.

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Governance Structure for the New Architecture

An aspect that has received less attention in the architecture discussions than it deserves is the need for an appropriate governance structure for the international financial system. Thus far, the governance structure of the Bretton Woods Institutions, with the Interim Committee and the Development Committee at the apex, has served as the effective political level governance structure for the international financial system. It is necessary to review the existing structure in the light of the changes that have taken place in the functioning of the world economy and their impact on the role of the Bretton Woods Institutions relative to private capital markets.

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