REFORMING THE IMS

1. Exchange Rate Regime: During 1990s, developed countries have adopted price stability as a main focus of monitory policy and exchange rate management has been given little importance. Most of the developing countries have opted for managed exchange rate regimes. In India rupee has been packed to a market related system. The objected of India has been ensure that the external value of rupee is realistic . Strengthening financial system: A sound national system is required for sustainable growth and financial stability. The financial system should be robust and sound to absorb internal and external shocks. There is also need for effective supervision and regulation because fionancial markets may not ensure safe and sound operation of the financial system. Capital Controls and Capital Accounts Liberalization:Capital flows which may cause financial instability can to some extent to controlled through capital control but for a short period.Capital controls regulate the volume and composition of capital flows.Taxes,reserve requirements,exchange restrictions and foreingn currency deposits with the countrys central bank are examples of capitals controls. Management of crisis:A financial crisis such as south-east asian crisis is generally characterized by financial or macro-economic imbalances.Crisis management initiatives are designed to correct these imbalances and to restore invester confidence in the financial system.These initiatives include macro-economics stabilization,liquidity support and guarantees to financial institutions, capital control, etc.

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5. Strenghening Multilateral Surveillance:The IMF evercises surveillance through governanace, informal staff monitoring and other methods.It also carries out country specific assessment and surveys.There is,need to strengthen the surveillance by multilateral agencies. 6. Transparency and Disclosure:In order to reduce vulnerability of economies to sudden market changer,uniform transparency codes are needed.Transparency and better information disclosure can promote rational behaviour in the part of international financial markets.The IMF has attempted to develop voluntary standard of transparency and disclosure. 7. Invovelmenet of the private sector: private sector is being increasingly involved in preventing and resolving the financial crises through market based instruments and incentives.The IMF has experimented with involvement of the private sector in case of korea,brazil,ukrain and some other countries.Liberalization and globlization have increased the possibilities for involvement of the private sector.