Symmetry Monetary System

Adjustment mechanism of the international monetary system has to be symmetrical, i.e., in international monetary arrangements all countries should have equal rights and equal obligations. According to Keynes, symmetrical international monetary order implies a common measure, a common standard, a common rule applicable to each country and not irksome to anyone.

In reality the IMF had failed to bring about a symmetrical monetary order. Thus, a major problem is how fast asymmetries in the system can be eliminated. There are, however, many practical constraints in achieving this goal. Nevertheless, the IMF has made some progress in recent years, in moderating the degrees of asymmetry between surplus and deficit countries particularly by facilitating adjustment in heavily indebted countries easing its burden and bringing its candid influence no their policies. In recent years, for instance, the fun has evolved liberal credit facilities along with the compensatory financing facilities the oil facilities; enlargement of the access of members to the Fund’s resources. So also, the structural adjustment facility and other devices of the Fund have helped in the creation of a contingency finking mechanism in their balance of payments (BOP). The Fund has also rendered technical assistance and moral support in solving their intricate BOP problems.

The Fund always exercises its moral sudation over the industrial/surplus countries to follow policies conducive to the growth and prosperity of the global economy. In recent years, the fund moral suasion has been widely and evenly exercised for injecting its due weight into the surveillance process towards symmetry in the adjustment mechanism. Yet, the fun has to make extra efforts for evolving a system which is just as well as efficient instead of mere guidelines, the fund solved formulate more comprehensive principles for achieving the goal of symmetry by giving it a precise shape true to the expectations of the members, at large.

Stability

Stability of the international monetary order is considerably jeopardized due to a high degree of exchange rate volatility in the regime of generalized floating system that has come up since the early 1970s. Developing countries have been hitted hard as a result. There has been large misalignment of exchange rates coursing misallocation of resources undue protectionism hindering the growth of world trade, resulting into imbalance and financial instability.

Of course, this does not imply that fixed exchange rates can easily bring stability. As a matter of fact instability is rooted in the shortcomings and inconsistencies of national economic policies.

A middle course is essential between excessive rigidity and extreme flexibility and misalignments in the exchange rates through proper international coordination and better management of national economic policies especially monetary and fiscal policies.

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