Why has the International Monetary Fund argued, through a staff paper, that there could be circumstances where capital controls may be warranted. It could be that since the current surge in capital flows to developing countries is causing problems, the IMF possibly does not want to be seen as having made the mistake of opposing capital controls as a means to manage excessive inflows. It has still to forget the criticism it faced when its intervention in the east Asian crisis exacerbated the downturn. On the other hand, by boxing in the situation where such controls are warranted, it appears to be encouraging policymakers in emerging markets to avoid such controls and providing them with the ammunition to justify inaction.