Will the current crisis trigger a revival of the IMF? Bruegel Policy Contribution 2008/06, November 2008

[From the Introduction]. As recently as a few weeks ago, a widely held view was that the IMF had lost its relevance in a world of increasingly free capital mobility where the financing needs of more and more developing countries were covered by capital markets. At the same time its legitimacy was at stake as a large part of the developing world openly questioned the sincerity of its advice and the structure of its governance. Even the governor of the Bank of England, Mervyn King, echoed the queries, commenting that “the Fund’s remit is unclear. Its lending activities have waned, and its role in the international monetary system is obscure” (King, 2006). Suddenly, however, calls for a “new Bretton Woods” have again put the Fund at the centre of the discussions on the reform of global financial and monetary arrangements. This note discusses the main challenges it faces and some options for reform1. Its main conclusion is that while the financial crisis and the revival of international cooperation put an end to existential questioning about the future of the Fund, it is unlikely to recapture the central role it once had and must rather adapt to a fragmented and changing landscape