IMF Hosts Conference on “Managing Capital Flows: Lessons from Emerging Markets for Frontier Economies” in Mauritius

The International Monetary Fund (IMF) hosted on March 2, 2015, a conference titled, “Managing Capital Flows: Lessons from Emerging Markets for Frontier Economies” in Balaclava, Turtle Bay, Mauritius. The Hon. Seetanah Lutchmeenaraidoo, Minister of Finance and Economic Development of Mauritius, and David Lipton, First Deputy Managing Director of the IMF, opened the conference, followed by a keynote address from Princeton Professor Dani Rodrik, Institute for Advanced Study, Princeton.

Amid the rising volatility of cross-border capital flows, the conference provided a forum for policy makers from emerging and frontier markets to share their experiences in managing capital flows and to engage in discussions about policy options on how best to benefit from foreign capital, while minimizing the risks associated with inflow surges.

Participants agreed that capital flows to frontier and emerging market countries are generally beneficial, and provide an important source of financing for investments. Nevertheless, large capital inflows (and potential reversals) can pose macroeconomic challenges and financial-stability risks. To mitigate these risks, countries should maintain fiscal discipline and ensure debt sustainability, as well as allowing the currency to appreciate to the extent that it does not become overvalued. In addition, they may usefully deploy a host of policy tools, including monetary policy geared to meeting the inflation target, foreign exchange intervention (in the face of currency appreciation pressures and provided the costs of sterilization are manageable, and the credibility of monetary policy framework is not jeopardized), as well as macroprudential measures, and in some circumstances, capital controls.

Speakers on the program included policy makers and senior officials from Bangladesh, Ghana, India, Kenya, Mauritius, Nigeria, South Africa, Uganda and Zambia, as well as distinguished academics and market participants. Also in attendance were senior officials from a number of frontier and emerging market countries.