By Jon Shields, Alternate Executive Director for the United Kingdom at the IMF, on secondment from the Bank of England. The views expressed reflect those of the author rather than those of the Bank of England, the UK Government or the IMF.
In this article, Jon Shields describes how the role of the IMF has developed since the Mexican crisis in 1994/95, which prompted the largest international support operation ever undertaken. He sets out the background to the crisis, including the rapid expansion of international capital markets, how the crisis was resolved and the lessons learned from it. Since then, the Fund has acted to improve the quality and extent of data that countries provide, and to enhance its own surveillance. It has also improved its procedures for allowing rapid financial support to be given and taken steps to ensure the adequacy of resources available to the Fund. Two possibilities still under consideration by the Fund are identified: burden-sharing with other creditors and adding the liberalisation of capital controls to the Fund’s objectives. Jon Shields concludes that though risks remain, the changes made by the Fund have put it in a better position to deal with another crisis such as that in Mexico.