Global Economic Governance and IMF Governance Reform : A Proposal

The IMF responded forcefully to the end of the par value system in 1971 by amending its Articles of Agreement and changing the scope of its interactions with its member states to better help them manage the challenges of a market based international monetary system. In addition to focusing on monetary policy and balance of payments in its engagements with its member states, the IMF began to raise any economic issue that it though could affect the member’s exchange rate or balance of payments. Consequently, the IMF has become more of a macro-economic development financing institution than a specialized monetary institution. Today, the IMF is again facing the need to change. It must help its member states address the macro-economic impacts of such complex issues as climate change, public health, inequality and discrimination. In addition, it must respond to the challenge that central banks and financial markets are posing to its role as the lead actor in global financial governance.This paper argues that responding to these challenges requires the IMF to reform its own governance arrangements. In order to make this case, the paper is divided into three parts. The first part describes the evolution in the IMF role in global economic governance. The second part discusses why the current governance arrangements are no longer fit for purpose. The final part will recommend some governance reforms that the IMF should undertake to remedy this situation. Given space limitations, the paper focuses on those reforms that the IMF can implement in the short term on its own and that do not require specific actions by its member states