The IMF Can (and Must) Disrupt Itself

• Author: Mohamed A. El-Erian
• Position: Chief economic advisor at Allianz and a former IMF deputy director
• Pages: 24-26

24 FINANCE & DEVELOPMENT | June 2019

POINT OF VIEWPOINT OF VIEW

The IMF Can (and Must) Disrupt Itself

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

Mohamed A. El-Erian

PHOTO COURTESY OF ALLIANZ

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