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Time to reform the IMF and the World Bank

Sep 21,2017 - Last updated at Sep 21,2017

This autumn, the International Monetary Fund (IMF)  and the World Bank will hold their annual conference. It cannot be business as usual.

To remain legitimate, effective and accountable, the Bretton Woods institutions, established in the very different world of 1944, must align representation with countries’ relative economic weight and systemic importance.

What about a scenario where emerging economies, led by China, decide to replace, rather than reshape, today’s institutions?

Already, China has spearheaded the creation of two multilateral development banks — the Asian Infrastructure Investment Bank and the New Development Bank. China’s initiatives have fewer resources than the World Bank, but they are big enough to finance significant infrastructure projects.

In addition, regional facilities have been put together to provide support at times of financial distress. The Chiang Mai Initiative pools the foreign-exchange reserves of the ASEAN+3 countries — approximately $240 billion. And BRICS countries can rely on a Contingency Reserve Arrangement of approximately $100 billion.

These facilities would help with occasional liquidity crunches rather than offering a more extensive financial safety net which remains the IMF’s prerogative. But this facility can be expanded if necessary.

To respond to the need to reform the Bretton Woods institutions an “Eminent Persons Group on Global Financial Governance” was set up last April.

This group is to make recommendations on reforming the world economy’s institutional structure, but it has only until next year’s IMF/World Bank conference to build a firm consensus.

Any attempt to reform the global economic order might clash with the US’s rethinking of its own involvement in world affairs. Trump has made clear his distaste for multilateral institutions, and he has been explicit that the US should no longer bankroll the provision of global public goods.

An attack on financial multilateralism would deal a massive blow to the global economic order.

But partial US disengagement need not spell disaster. A year is probably not long enough to deal with the disruption that a reluctant hegemon may create, but it might reveal the scale of that disruption and the capability of other stakeholders to adapt.

 

 

The writer is research director of international economics at Chatham House and professor of economics at the University of Bologna. ©Project Syndicate, 2017. www.project-syndicate.org

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THANKS TO PROFESSOR EC. BUT IT IS NOT JUST A MATTER OF AGING AND OUTDATED ECONOMIC MODEL BUT THE ERADICATION OF AN ECONOMIC SHACKLE ARROUND THE NECK OF DEVELOPING COUNTRIES BY OUR MASTERS. GOOD LUCK MY FRIEND BECAUSE IT IS THE SAME AS REFORMING THE UN SECURITY COUNCIL. DONT YOU KNOW THAT THE IMF IS AN INSTRUMENT OF CONTROL FOR POOR AND DEVELOPING COUNTRY. IF THEY REFORM IT, IT COULD MEAN A LOSS OF CONTROL FOR THEIR SLAVES AND GODDIES THEY EXTRACT FROM THEIR SUBJECTS. GOD SAVE THE QUEEN.

It is time to reform IMF and World Bank to take into account the great economic changes since 1944 of Breton Wood Conference establishing the two Internatioan institutions

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