Need for IMF Reform
The Asian economic crisis has highlighted the need to reform the IMF by establishing a new global
financial architecture that will counteract the 'casino' effects on the economies of the world caused by
mercurial changes in investor confidence and massive cross-border inflows and outflows of short-term
capital. These massive cross-border inflows and outflows of short-term capital, which are a hallmark of
the increased financial globalization of the world economy, have also increased macroeconomic
volatility and pose a disruptive threat to world trade, investment and, therefore, growth. As a result; there is
an emerging consensus that global financial institutions such as the IMF need to be reformed so
that they can address the issues of capital hypermobility' and sudden surges in exchange-rate
volatility that occur due to changes in the ebb flow of short-term financial capital in the global economy. ;
Seven pillars for establishing a global financial architecture or institutional framework for calming
down the volatile tendencies of the global financial markets have been identified! They relate to the
• harnessing of the dynamics of the global information economy for development,
• integration of developing economies with the global economy,
• steadfast pursuit of trade liberalization and open-door investment policies,
• adoption of transparent world best-practice management techniques,
• pursuit of excellence in corporate governance and elimination of corruption, D adoption of international accounting and codes of prudential regulation,
• use of the accumulated expertise of the IMF to solve global problems.