3 - Shifting the IMF Mandate

Summary

In the absence of an international framework applicable to cross-border capital flows, there is little doubt that the Fund had to assert its authority over capital movements. Without the Fund, a legal lacuna would exist and financial movements would go largely unregulated. Yet, it is less certain whether the Fund ever had the formal legal authority to empower itself to act as a de facto financial authority. A strict reading of the Articles of Agreement suggests that the Fund historically had no mandate over capital movements. Yet, several decades ago the Fund began slowly but steadily appropriating and assuming authority over capital movements. This chapter explores the legal instruments used by the Fund to organise the shift and expansion of its mandate. The chapter makes two major points. First, while the Fund grounded its mandate expansion on the text and wording of the Articles of Agreement, it relied on an Article IV byroad to interpret its constitutive instrument to escape the historical distinction between capital movements and current international transactions. Second, the Fund’s Institutional View of 2012 was not a radical break from tradition but merely a formalization and crystallisation of the ideas and direction it has pursued since 2008.