ACHIEVEMENTS OF BRETTON WOODS INSTITTUTIONS:

Some of the important achievements of the BW Institutions can be summarised as follows:

1) International reserves have increased substantially, providing a larger borrowers, halt now hold reserves greater than 150 per cent of maturing short and long- term debt; less than one-sixth had such coverage healing into 1997.

2) There have been improvements in fiscal performance, with some notable cases of governments achieving and sustaining large primary surpluses. 

3) External balances have improved, with current accounts in most of the emerging world in surplus or modest deficit. Only 2 of the 20 largest borrowers now are running deficits in excess of 3 per cent.

4) Exchange rate regained are ore resilient and less fragile, and a substantial majority of the largest borrowing countries have moved to flexible, regimes, and away from the fixed-but adjustable pegs that proved so dangerous in the crises of the 1990s.

5) Important progress has been made in building credibility for new monetary policy requires, and inflation is generally moderate.

6) Governments have made major investments in recapitalising and restructuring their troubled financial systems. For example, in Asia, where some of the most severe problems were encountered, governments have spent over $500 billion carving out problem loans and bolstering capital. 

7) Growth rates have improved with the restoration of domestic stability and recovery in external demand. Indeed, aggregate growth currently is running at its highest rate since the on set of the crisis in 1997.

8) With these improvements, and generally accommodative external financial conditions, borrowing costs have fallen, capital market access was restored for many countries, and credit growth resumed. Net credit growth to sovereigns has remained moderate, however, as much of the borrowing has gone to refinancing the existing stock of debt on more favourable terms. 

9) The market for emerging market debt has also matured. There has been more differentiation in the response of spreads, both on the way down and credit fundamentals seemed to improve, and during the recent correction. 

This progress is indicative of a general increase in the sophistication and skill of economic policy makers in the emerging world, and in the quality of understanding of the benefits of macroeconomic stability and how to achieve it. Many countries benefited from the advice and financial support from the IMF and the World Bank. 

But the most successful were those with policy makers who were ahead of the Fund and the Bank in diagnosing and addressing their problems, rather than being dragged reluctantly toward a more credible policy stance. These improvements have left the emerging markets as a group less vulnerable to financial crisis than they were in the id 1990s. The combination of deeper reserve cushions, stronger external positions, improved balance sheets, more flexible exchange rate required, and better inflation performance provide a very different setting from what existed the last time the world faced a transition after a sustained period of benign financial conditions and low interest rates.