The IMF Can (and Must) Disrupt Itself

Author:Mohamed A. El-Erian
Position:Chief economic advisor at Allianz and a former IMF deputy director

In a rapidly changing world, the IMF needs member country support

The IMF Can (and Must) Disrupt Itself
In a rapidly changing world, the IMF needs member country support
Mohamed A. El-Erian
THERE IS LITTLE DOUBT in my mind that if the IMF
didn’t exist today there would be loud calls to create it.
Without the IM F, there would be no true lender
of last resort at the international level at a time
when crises can strike a country suddenly and
infect other economies. Countries would need a
higher level of inecient self-insurance, includin g
holding very large amounts of c ostly international
reserves. ey would be more tempted to weaponiz e
economic tools in the pursuit of narrow interests.
ere would be less information sharing and less
scope to coordinate economic policy to mai ntain
global growth and stability.
Markets would be less orderly and ecient.
Participants would miss the information, anal-
ysis, and data contained in the IMF’s country
and regional reports, not to mention the highly
anticipated periodic releases of the World Economic
Outlook, Fiscal Monitor, and Gl obal Financial
Stability Report. ey would lack the third-
party validation the Fund provides on individual
countries’ policies, as well a s the important catalytic
role of its lending.
All this wou ld likely lead to greater risks of both
government and market failure s and a higher inci-
dence of policy mistakes and market accidents—
thereby eroding the ability of indiv idual countries
to generate high and inclusive growt h and safeguard
nancial stability. And, remember, these risks are
already elevated because of the current set of chal-
lenges facing the global economy (see “e IMF
Today and Tomorrow” in this issue of F&D).
If it were to be invented today, how would the
IMF compare with what we have known for the
past 75 years? It would retain many of the structural
attributes its founders envisioned. With a universal
membership and a high-caliber sta, it would con-
tinue to fulll its core functions: monitoring the
well-being of individual economies and the world
economy, lending to countries in need, helping
governments build the capacity to shape sound eco-
nomic and nancial policies, and serving as a forum
for discussion.
But it should, can, and must do more—being
more of a leader in, and facilitator of, the orderly
adaptation and transform ation of the international
system. To do that, it needs to devote more atten-
tion to how its sta is organiz ed; how issues such
as technology, social injustice, and sustainability
are incorporated into its core activitie s; and how its
executive board, management, and sta interact.
None of this would achieve its aim if member
countries didn’t also step up to their responsibilities
at both the individual a nd collective levels.
A revamped IMF would have higher quotas to
back its activities, together w ith modernized distri-
bution among member countries and greater acces s
to borrowed nancial resourc es. It would maintain a
range of lending facilitie s to meet the dierent needs
of its member countries. It would focus on its core
competencies while being mindf ul of the need to
take into account the eec ts of other macrocritical
issues, such as clim ate change. It would collaborate
with other multilateral a nd regional agencies. And

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