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Why is the IMF at an impasse, and what can be done about it?

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  • Wade, Robert H.
  • Vestergaard, Jakob

Abstract

The International Monetary Fund is at an impasse, acutely short of secure lending resources. The main reason is that the US Congress is blocking ratification of an agreement reached in 2010 by all member states that would almost double its permanent loanable funds (its quota). World leaders should be worried that the Fund is currently relying on the good will of countries to supply it with short-term loans which it can on-lend to countries in crisis. This is not a solid foundation for the nearest thing the world system has to an international lender-of-last- resort. Since the IMF's multilateral functions cannot be readily replicated, it is important to find a way out. All solutions lead back to the US veto, the US being the only state (Treasury or Congress) able to veto supermajority decisions. The prospect of more financial crises ahead while the Fund is chronically short of secure lending resources should focus all minds on how to end the US veto. Otherwise the Fund will follow the WTO towards irrelevance, to the benefit of the few countries at the strong end of bilateral and regional arrangements.

Suggested Citation

  • Wade, Robert H. & Vestergaard, Jakob, 2015. "Why is the IMF at an impasse, and what can be done about it?," LSE Research Online Documents on Economics 64106, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:64106
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    File URL: http://eprints.lse.ac.uk/64106/
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    References listed on IDEAS

    as
    1. Agnès Bénassy‐Quéré & Sophie Béreau, 2011. "Rebalancing IMF Quotas," The World Economy, Wiley Blackwell, vol. 34(2), pages 223-247, February.
    2. Vestergaard, Jakob & Wade, Robert H., 2013. "Protecting Power: How Western States Retain The Dominant Voice in The World Bank’s Governance," World Development, Elsevier, vol. 46(C), pages 153-164.
    3. Edwin M. Truman, 2014. "IMF Reform Is Waiting on the United States," Policy Briefs PB14-9, Peterson Institute for International Economics.
    4. Edwin M. Truman, 2015. "What Next for the IMF?," Policy Briefs PB15-1, Peterson Institute for International Economics.
    5. David WOODWARD, 2007. "IMF Voting Reform: Need, Opportunity and Options," G-24 Discussion Papers 49, United Nations Conference on Trade and Development.
    6. Jakob Vestergaard & Robert H. Wade, 2015. "Still in the Woods: Gridlock in the IMF and the World Bank Puts Multilateralism at Risk," Global Policy, London School of Economics and Political Science, vol. 6(1), pages 1-12, February.
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    Cited by:

    1. David P. Rapkin & Jonathan R. Strand & Michael W. Trevathan, 2016. "Representation and Governance in International Organizations," Politics and Governance, Cogitatio Press, vol. 4(3), pages 77-89.

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    More about this item

    JEL classification:

    • N0 - Economic History - - General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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