IMF and capital controls in developing countries

The IMF, Capital Controls and Developing Countries

By Kevin P. Gallagher

Economic and Political Weekly, May 7, 2011

Last month the International Monetary Fund formally suggested that there may be situations when developing countries can gain from placing regulations on the inward flow of foreign capital. In this article, GDAE’s Kevin P. Gallagher critically analyzes the new IMF policy, based on a close analysis of two recent IMF documents. While the new flexibilities are welcome, Gallagher finds that the new “advice” comes with so many conditions that many developing countries have already rejected the recommendations and sent the IMF back to the drawing board. Gallagher argues that rather than telling developing countries what to do and when, the IMF should focus more on helping governments enforce capital controls, and it should stress the need for the global coordination of those controls so they can achieve their intended goals.

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