The IMF and the Future of International Monetary and Financial Cooperation

Ministry of Economy and Finance, Rabat

By Edwin M. Truman, Non-Resident Senior Fellow, Peterson Institute for International Economics

For almost 75 years, the International Monetary Fund has been at the center of the post-World War international monetary system. The institution has evolved as the global economy has been transformed politically and economically. As with other international institutions, the IMF and its position in the center of the system are now under threat from potential neglect by the Trump administration and from competition from China as the principal rival to US domination of the Bretton Woods system. For example, the US Secretary of the Treasury Steven Mnuchin has stated that the IMF has adequate financial resources, implying that the review of IMF quotas that is to be completed by the end of 2019 need not add further to IMF resources, even though some of the IMF’s current resources will be unavailable after 2020. If IMF quotas are not increased, the governance of the IMF will remain static, frustrating the dynamic emerging market economies. 

Policy implications. First choice: If the United States does not want to participate in a further expansion of IMF quota resources, it should step out of the way while other countries do so. Second choice: If the United States blocks a further expansion of IMF quotas, other countries will need to provide renewed and preferably expanded bilateral lending to the IMF to preserve its role in the center of the system. Third choice: If other countries do not want to renew and expand their bilateral lending to the IMF, they under Chinese leadership will be tempted to establish new institutions for either regional or global lending operations, thus weakening the role of the IMF at the center of the system.