New urgency for governance reforms at IMF and World Bank

THE emergence of alternative multilateral financing institutions and mechanisms in Asia ought to be a wake-up call for politicians and policymakers in, particularly, the United States and Europe. The key message is that so long as the International Monetary Fund (IMF) and the World Bank remain under the overwhelming dominance of industrial countries, their influence over the global economy will erode. Thus far, it appears that this message has gone unheeded.

Consider some of the developments since the Asian crisis of 1997. During the crisis, Japan floated the idea of an Asian Monetary Fund as a regional alternative to the IMF. This idea was promptly shot down by the United States. In the year 2000, the Chiang Mai initiative (CMI) was conceived by Asean, China, Japan and Korea. The idea was to have a network of bilateral currency swap arrangements which would enable members to weather speculative attacks on their currencies and short term liquidity problems which many countries had encountered during the Asian crisis. The CMI was launched in 2010 and expande…