At the G-20 summit in South Korea, held on Oct. 20, a group of 20 finance ministers and central bankers agreed to reform the International Monetary Fund (IMF).The IMF, which monitors nations’ economic policies, is an organization of 187 countries. The IMF works to foster global monetary cooperation; secure and facilitate financial stability, international trade, and economic growth; and reduce poverty around the world.

According to BBC News, the reform will give major developing nations a chance to gain more seats on the IMF’s board, while Western Europe will lose two seats. This advancement will give the developing nations more of a say.

Over time, the IMF has been on the receiving end of many criticisms, generally focused on the conditions of its loans. The IMF has also been criticized for its lack of accountability and willingness to lend to countries with bad human rights records.

A particular topic discussed at the G-20 summit was changes in how the IMF should be run. The G-20 summit marked the first real initiative to respond to these criticisms, and the reforms could potentially decrease some of the strong opposition that the IMF has faced in the past.

Ken Gilmore, associate professor and chair of political science, responded through e-mail about the legitimacy of IMF.

“The IMF is the Ditech of the global economy – it provides loans to countries that find themselves in trouble, at lower than market rates, with the expectation that the country will get its financial house in order,” said Gilmore. “That said, it has done a mediocre job of designing and implementing austerity programs, and it doesn’t have the cash to really make the significant changes needed.”

According to The New York Times, the G-20 agreed to transfer more than six percent of voting power within the IMF to “dynamic emerging-market and developing countries” like Brazil and India by the fall of 2012. This agreement would give major developing nations more of a say.

Pranab Mukherjee, Indian finance minister, acknowledge the fund’s credibility.

“The legitimacy of the IMF is increasing,” said Mukherjee.

The New York Times reported that the G-20 summit members also voted to further increase the role of the IMF as a watchdog over its member economies. Hopes are that this increase might help mediate difficult trade and currency disputes.

Officials agreed to empower the IMF to investigate the persistently large imbalances and determine the root causes of why adjustment had been so hard to achieve.

Also responding to The New York Times, Yoon Jeung-hyun, South Korean finance minister, said that the agreement would help remove any dissemblance within foreign exchange rates.

“This will put an end to the controversy over foreign exchange rates,” Jeung-hyun added.

Gilmore discussed with The Guilfordian his opinion on negotiating balance within trade, rather than revaluing currency.

“Revaluing has fewer political benefits domestically,” responded Gilmore. “Currency appreciation hurts exporters and helps importers and the non-traded goods sector. Devaluing does the opposite – pretty blunt instrument, politically. Trade balance agreements (tariffs, NTBS, quotas) can reward specific domestic political allies.”

The BBC also reported that the G-20 members agreed to refrain from competitive devaluations of their currencies and move towards more market-determined currency systems.

Treasury Secretary Timothy F. Geithner spoke to The New York Times about his experience during the meeting.

“The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future,” said Geithner.

Tension on the global financial markets have put strain on the currencies of two of the world’s largest economies – the United States and China. The U.S. agreed to be “vigilant against excess volatility and disorderly movements in exchange rates,” while China in particular would have faced new pressure to let its currency, the renminbi, rise against the dollar.

The U.S. economic policies were criticized at the meeting, according to The New York Times. Several officials expressed concerns to Ben Bernanke, the Federal Reserve chairman, that the U.S. economic policies would result in weakening the dollar.

“Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate,” German Economy Minister Rainer Brüderle warned.

In effect, Brüderle accused the United States of the same type of currency weakening for which China has been criticized.

Following the G-20’s agreement to make some major changes in the IMF, it remains to be seen how these changes will be implemented and how they will change IMF’s relationship with the global economy.

According to Gilmore, “coordinating financial/banking reforms among the members and pressuring China to revalue” will be among the topics discussed in next month’s G-20 meeting in Seoul. At this summit, many world leaders, including President Obama, will meet once more with the hopes of making some changes and moving forward economically.

At the G-20 summit in South Korea, held on Oct. 20, a group of 20 finance ministers and central bankers agreed to reform the International Monetary Fund (IMF).The IMF, which monitors nations’ economic policies, is an organization of 187 countries. The IMF works to foster global monetary cooperation; secure and facilitate financial stability, international trade, and economic growth; and reduce poverty around the world.

According to BBC News, the reform will give major developing nations a chance to gain more seats on the IMF’s board, while Western Europe will lose two seats. This advancement will give the developing nations more of a say.

Over time, the IMF has been on the receiving end of many criticisms, generally focused on the conditions of its loans. The IMF has also been criticized for its lack of accountability and willingness to lend to countries with bad human rights records.

A particular topic discussed at the G-20 summit was changes in how the IMF should be run. The G-20 summit marked the first real initiative to respond to these criticisms, and the reforms could potentially decrease some of the strong opposition that the IMF has faced in the past.

Ken Gilmore, associate professor and chair of political science, responded through e-mail about the legitimacy of IMF.

“The IMF is the Ditech of the global economy – it provides loans to countries that find themselves in trouble, at lower than market rates, with the expectation that the country will get its financial house in order,” said Gilmore. “That said, it has done a mediocre job of designing and implementing austerity programs, and it doesn’t have the cash to really make the significant changes needed.”

According to The New York Times, the G-20 agreed to transfer more than six percent of voting power within the IMF to “dynamic emerging-market and developing countries” like Brazil and India by the fall of 2012. This agreement would give major developing nations more of a say.

Pranab Mukherjee, Indian finance minister, acknowledge the fund’s credibility.

“The legitimacy of the IMF is increasing,” said Mukherjee.

The New York Times reported that the G-20 summit members also voted to further increase the role of the IMF as a watchdog over its member economies. Hopes are that this increase might help mediate difficult trade and currency disputes.

Officials agreed to empower the IMF to investigate the persistently large imbalances and determine the root causes of why adjustment had been so hard to achieve.

Also responding to The New York Times, Yoon Jeung-hyun, South Korean finance minister, said that the agreement would help remove any dissemblance within foreign exchange rates.

“This will put an end to the controversy over foreign exchange rates,” Jeung-hyun added.

Gilmore discussed with The Guilfordian his opinion on negotiating balance within trade, rather than revaluing currency.

“Revaluing has fewer political benefits domestically,” responded Gilmore. “Currency appreciation hurts exporters and helps importers and the non-traded goods sector. Devaluing does the opposite – pretty blunt instrument, politically. Trade balance agreements (tariffs, NTBS, quotas) can reward specific domestic political allies.”

The BBC also reported that the G-20 members agreed to refrain from competitive devaluations of their currencies and move towards more market-determined currency systems.

Treasury Secretary Timothy F. Geithner spoke to The New York Times about his experience during the meeting.

“The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future,” said Geithner.

Tension on the global financial markets have put strain on the currencies of two of the world’s largest economies – the United States and China. The U.S. agreed to be “vigilant against excess volatility and disorderly movements in exchange rates,” while China in particular would have faced new pressure to let its currency, the renminbi, rise against the dollar.

The U.S. economic policies were criticized at the meeting, according to The New York Times. Several officials expressed concerns to Ben Bernanke, the Federal Reserve chairman, that the U.S. economic policies would result in weakening the dollar.

“Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate,” German Economy Minister Rainer Brüderle warned.

In effect, Brüderle accused the United States of the same type of currency weakening for which China has been criticized.

Following the G-20’s agreement to make some major changes in the IMF, it remains to be seen how these changes will be implemented and how they will change IMF’s relationship with the global economy.

According to Gilmore, “coordinating financial/banking reforms among the members and pressuring China to revalue” will be among the topics discussed in next month’s G-20 meeting in Seoul. At this summit, many world leaders, including President Obama, will meet once more with the hopes of making some changes and moving forward economically.