After the the praise that the International Monetary Fund last week lavished on George Osborne's emergency Budget, it is small wonder that the Chancellor is rushing off to the organisation's meeting in Washington on Friday with a spring in his step. Actually, some of the IMF's latest research is rather more equivocal about the economics of austerity than its headline support for the Coalition's fiscal plans suggests. Moreover, the IMF is not infallible. In April 2008, it forecast two years of subdued, but steady, growth for Britain. What we got instead was a GDP contraction of more than 6 per cent.

Forecasting aside, the IMF played an effective fire-fighting role during the financial crisis. It made $750bn in lines of credit available to struggling nations at the G20 meeting in April 2009. And it played a key role in the eurozone rescue package agreed in May this year. The IMF helped to calm financial markets on both occasions.

But the problem remains that, like the United Nations Security Council, the IMF's board reflects the world of 1945 rather than 2010. The European Union accounts for around a fifth of global GDP, but controls a third of the IMF's votes. The G20 agreed last year in Pittsburgh to increase the combined voting weight of emerging economies on the IMF board by 5 per cent. But even after this change, rising powers such as India, China, Brazil and Turkey are under-represented and Europe over-represented. It has been suggested that the European Union might give up two of its seats on the board. This sounds like a reasonable next step, so long as further reform follows.

Although the IMF has played a constructive role in the recent panic, its behaviour in the 1997 Asian financial crisis was disastrous. Brutal austerity was enforced by the IMF on Asian states. This experience encouraged nations such as China to stockpile foreign currency reserves so they would never be in the position of being ordered around by the IMF. This stockpiling of foreign assets drove down interest rates in advanced nations and helped to sow the seeds of the 2008 financial meltdown.

It has not gone unnoticed that the medicine demanded by the IMF from western nations that have got into trouble in recent years has been much less bitter than that forced upon Asian defaulters more than a decade ago. In a globalised and increasingly open international economy, the IMF plays a vital role. But it needs legitimacy. Mr Osborne, rather than seeking to make political capital out of the IMF's praise later this week, should be pushing for its reform.