The IMF Needs to be More Flexible about Capital Controls

By Kavaljit Singh | Letter (FT) | October 18, 2018

Nor Shamsiah Mohd Yunus, central bank governor of Malaysia, rightly warns against the deeply-rooted stigma attached to capital controls that can be helpful in pre-empting financial crises  (“Malaysia backs option of capital controls”, October 17).  As many emerging market economies in Asia and elsewhere are currently grappling with the challenges posed by volatile capital flows (large capital inflows followed by abrupt reversals), it is high time for the IMF to revisit its 2012 Institutional View that endorses capital controls as a last resort, imposed selectively on capital inflows, and on a temporary basis.

The Institutional View is a welcome departure from the IMF’s earlier rigid stance but…

Reform the IMF to Reflect New Economic Landscape

By Kavaljit Singh | Letter (FT) | September 21, 2018

Martin Sandbu rightly warns about the diminishing role of the IMF as a crisis manager (Free Lunch, September 19). The challenges faced by the fund are much bigger than its lack of financial resources to put out fires. The current financial market turmoil in Argentina shows the IMF’s standby loan of $50bn — the largest ever credit line in IMF history — has failed to provide an effective anchor for addressing financial vulnerabilities and bolstering market confidence.

The immediate disbursement of $15bn (30 per cent of the total IMF loan) to Argentina did not help in averting currency collapse or arresting capital flight.

These developments in Argentina may…

Investment Facilitation: Another Fad in the Offing?

By Kavaljit Singh | Commentary | August 14, 2018

While nearly 90 members did not support discussions on investment facilitation at the WTO’s Eleventh Ministerial Conference held in Buenos Aires in December 2017, a group of 70 members decided to launch a plurilateral initiative. Broadly speaking, investment facilitation refers to measures aimed at helping investors to start, operate and exit their businesses. Aimed at removing ground-level obstacles, it seeks to enhance the investment environment by improving transparency and predictability of investment policies, streamlining administrative procedures and adopting tools to handle inquiries or complaints by investors. Such measures are often seen as a means to attract FDI and maximize its contribution to development.

Notwithstanding that investment…

Why India should say ‘Sayonara RCEP’!

By Shalini Bhutani | Commentary | July 24, 2018

Japan has been in the news as the flag bearer of free trade in current times. This is particularly so after the USA under President Trump has been questioning international trade rules, be it the multilateral WTO or the regional NAFTA and the withdrawal from TPP. This, however, does not mean that the USA is withdrawing from trade liberalisation. It will pursue that through bilateral FTAs (free trade agreements). It only wants a better deal for American interests.

USA and Japan each have their ambitions for the Asia Pacific region. Japan is a big market for US goods, including for agricultural products and pharmaceuticals. While…

Rupee Depreciation: Causes and Consequences

By Kavaljit Singh | Commentary | July 9, 2018

On June 28, 2018, the Indian rupee plunged to an all-time low of 69.10 against the US dollar amid growing concerns over tightening of global financial conditions and higher crude oil prices coupled with the worsening of domestic macroeconomic variables especially the current account balance and inflation.

The mad rush for dollar by importers and currency speculators was halted temporarily after the central bank, Reserve Bank of India, aggressively intervened in the currency markets by selling dollars in both spot and forward markets to arrest the slide in the rupee. If the RBI had not intervened in the currency markets on that day, the rupee…