HC Deb 24 June 1999 vol 333 cc462-3W
Mr. Chaytor

To ask the Chancellor of the Exchequer what is the UK's policy advice to developing countries on capital controls; and what assessment he has made of IMF agreements which prohibit a Government from imposing capital controls. [86942]

Ms Hewitt

[holding answer 14 June 1999]We encourage emerging markets to carry out capital account liberalisation in a careful and well sequenced manner. However, the use of controls on capital inflows may be justified during transitional periods as emerging markets strengthen the institutional and regulatory environment in their domestic financial systems. Controls on capital outflows may sometimes be necessary in exceptional circumstances. But controls on capital flows, particularly on outflows, carry costs and are no substitute for necessary reforms.

The international financial crisis has clearly demonstrated that the IMF should play a constructive role in helping countries to liberalise their capital accounts in an orderly way. But the IMF should also further refine its analysis of the experience of countries with the use of capital controls.