Three Dark Clouds Over The Bretton Woods Twins

Context: Recent global challenges represents a rare chance to correct the foundational flaws of Bretton Woods institutions i.e. World Bank Group and the International Monetary Fund (IMF).

Challenges faced by Bretton Wood Institutions

• Controversy over the Bank’s Doing Business report:  Due to corruption charges on IMF managing director.
• Washington Consensus orthodoxy, recast in statistical form since ranking of countries based on a “synthetic" methodology.
• Apparent ideological agenda in the Fund-Bank risk- rewards matrix with involvement politically-fraught agency.
• Coercion by ranking: As it left no room for an alternative development strategy, but held weight with global investors.
• Pandemic’s long-term contribution to uncertainty over a global economic recovery: IMF’s World Economic Outlook stated that pandemic has widened the existing economic gap between rich and poor nations. Due to
  • Non-availability of supportive fiscal policy to kickstart growth and employment, as in advanced economies.
  • Squeezed fiscal space of poor nations, hindering their growth prospects for some time to come.
  • Uneven pace of vaccination across economies.
  • Issues with US Federal Reserve’s proposed monetary-policy normalization.
• Visible threat of climate change due to prolonged disequilibrium. No global consensus on any policy.

Way forward: IMF and World Bank shall

• Shed their orthodoxy and provide higher volumes of concessional funding at an accelerated rate, either directly or by precipitating financial flows from other agencies.
• Look beyond the conventional, anticipate nascent risks and act authoritatively.
• Minimize the influence of America’s domestic politics by leaving their past ideological moorings.