The third session focused on the role of the International Financial Institutions (IFIs) as the key institutions of multilateral cooperation, assisting their members through the provision of key public goods.

The International Monetary Fund (IMF) plays a key role in promoting the public good of international financial stability by assisting its members in striking the right balance between financing and adjustment and by encouraging timely policy adjustments and identifying potential risks through its surveillance of members’ policies (issues of key importance in terms of both crisis resolution and crisis prevention). To be effective, however, the Fund must be viewed as legitimate, credible and effective. A key issue here is ensuring that voting quota shares accurately reflect the shifting weight of its members in the global economy.

At the same time, there is a need to complete the institutional arrangements under which the IMF operates to align them with the evolution that has occurred over the past 30 years in global financial markets. As private capital flows have increased in importance, the Fund’s ability to operate under the simple, transparent and incentive-compatible rules of balance of payments adjustment has been impaired. Instead of assisting its members to deal with current account problems, filling balance of payments gaps —thereby providing members time (or breathing space) to smooth the adjustment process — the Fund must now attempt to influence the expectations of a heterogeneous group of private creditors fleeing capital account crises. To do this, the IMF has increasingly operated in a world of discretion, rather than rules, and one in which its traditional policy prescriptions are viewed as both less effective and more intrusive in terms of the fiscal and other adjustment they require.

Similarly, fundamental governance challenges will have to be overcome at the World Bank if it is to be expanded sufficiently to provide the global public goods that will, increasingly, come to the fore over the coming decades. To assist the international community in dealing with such challenges, the World Bank needs to be considered both credible and effective. The institution must be perceived as accountable to the taxpayers of the members providing capital, particularly in an environment in which major new contributors would dilute the managerial prerogatives exercised by existing large shareholders.

Chair: Tom Bernes, CIGI (confirmed)

Panellists:

  • Amar Bhattacharya, G24 (confirmed)
  • Jack Boorman, International Monetary Fund (retired) (confirmed)
  • Danny Bradlow, University of Pretoria (confirmed)
  • Jo Marie Griesgraber, New Rules for Global Finance Coalition (confirmed)
  • Ngaire Woods, University of Oxford (confirmed)
Program
Over the past five years, the global financial crisis has dominated international policy discussions. This August marks the fifth anniversary of its outbreak. The starting point for the CIGI ’12 conference, then, is the recognition that the legacy of the global financial crisis is felt across a spectrum of issues. These issues span the short-term outlook for global growth, global financial regulation and strengthening the Financial Stability Board (FSB); the challenges of poverty reduction and sustainable development; and the transition in global leadership, as, on the one hand, US economic and strategic leadership is eroded by the legacy of the financial crisis and political gridlock over public finances, while, on the other hand, China and other emerging economies continue their economic and geo-political rise. CIGI ’12 will focus on making concrete policy recommendations to build the global governance arrangements that are needed to respond effectively to the legacy of the crisis.
The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.