IMF adopts view on capital controls, New Delhi wary
Emerging markets have blamed loose monetary policies in rich nations for spurring destabilizing flows of hot money, and the IMF is trying to forge a consensus on when it makes sense for nations to resort to capital curbs.
The IMF emphasized it new "institutional view" was not mandatory and said whether or not a country follows them would have no bearing on IMF financing decisions.
The IMF broke from its long-held position that regulating capital flows was bad in 2010. Since then, it has tried to forge rules of the road for capital flows management, but its membership is divided over what those rules should be.
Among the principles, the IMF recommended that capital flow measures should not substitute for macroeconomic adjustment; in certain circumstances curbs can be useful when underlying macroeconomic conditions are highly uncertain; measures are useful to safeguard financial stability when surges contribute to systemic risks; and countries should make sure their policies do not harm others.
Investment flows can help countries develop and grow, but they can also drive up inflation and exchange rates. In addition, a sudden investor withdrawal can be destabilizing.
Countries from Brazil to Indonesia, South Korea, Peru and Thailand have all imposed controls to limit inflows since 2009, while a few countries like Argentina, Iceland and Ukraine have sought to stem large
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