Bloomberg : IMF Officially Endorses Capital Controls in Reversal
The International Monetary Fund endorsed nations’ use of capital controls in certain circumstances, making official a shift, which has been in the works for three years, that will guide the fund’s advice.
In a reversal of its historic support for unrestricted flows of money across borders, the Washington-based IMF said controls can be useful when countries have little room for economic policies such as lowering interest rates or when surging capital inflows threaten financial stability. Still, it said the measures should be targeted, temporary and not discriminate between residents and non-residents.
IMF Managing Director Christine Lagarde has cited the shift on capital controls as an illustration of the fund’s attempts to modernize....
The guidelines are “not set in stone” and will be reviewed and updated in the light of new experience and research, Vivek Arora, an assistant director in the IMF’s strategy, policy and review department, told reporters on a conference call today.
“It could have a chilling effect on countries’ ability to put in place regulations,” Gallagher said in a phone interview. “It will be tacitly endorsed by a lot of central banks and it will have an impact.”