## No Time for Half Measures

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**Canonical URL:** [No Time for Half Measures](https://www.imf.org/-/media/files/publications/fandd/article/2024/06/wolf.pdf)

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### Context and problem statement
- The postwar international architecture established at Bretton Woods has supported remarkable progress over the past 80 years, but the current environment is "arguably more challenging than at any time since its founding."
- Recent shocks: the pandemic, Russia’s war in Ukraine, and the Israel-Hamas war.
- Key long-term trends identified earlier and reaffirmed: a shift in economic and political power toward emerging markets (especially China); US–China rivalry; rising populism; backlash against globalization; transformative technologies (internet, artificial intelligence); pervasive financial fragility including rising public debt to GDP; a period of secular stagnation followed by sudden jumps in inflation and higher interest rates; and rising salience of climate change.
- "Cracks in the edifice of global cooperation are deeper, pressure on global institutions is greater, and long-term economic performance has deteriorated."

### IMF recent actions and role
- Since the pandemic the IMF has "provided about $1 trillion in liquidity and financing to our 190 member countries."
- New lending facilities introduced, notably the Resilience and Sustainability Trust (operational since October 2022), funded by voluntary long-term loans from members and intended to channel some special drawing rights (SDRs) to low-income and vulnerable middle-income members.
- IMF surveillance highlights: proposals to end the COVID-19 pandemic (Ruchir Agarwal and Gita Gopinath, May 2021); pointing out economic costs of the backlash against globalization; skepticism about an uncritical rush to active industrial policies; warnings on dangers of excessively loose fiscal policies.

### Four-element agenda to make the IMF and IFIs work better
- First: Radically improve handling of unserviceable debt overhangs.
  - Need better coordination among Paris Club official lenders, Chinese institutions, and private lenders.
  - The G20 common framework is "not doing enough" for poor countries.
  - Nearly $200 billion flowed out of developing countries to private creditors in 2023, "completely dwarfing the increased financing from IFIs."
  - Calls for a sovereign debt restructuring mechanism; the world needed one in 2002 and "needs one even more today."
- Second: Substantially increase resources for the IMF and other IFIs.
  - More resources are required so the IMF can provide insurance against shocks and play its catalytic financing role for development and global public goods (especially climate stability).
  - The IMF’s primary role is backup funding, which requires substantially more resources to be effective.
- Third: Align voting shares with the contemporary balance of global economic influence.
  - Current imbalances: Japan’s quota share is bigger than China’s; the UK’s quota share is bigger than India’s.
  - The overweighting of high-income countries undercuts institutional legitimacy; arguments about convertible-currency possession do not justify the present degree of imbalance.
- Fourth: End the custom of selecting a European IMF managing director and a US World Bank president; open leadership selection to the best candidate "from anywhere in the world."

### Overarching implications and recommendations
- Firefighting measures and sensible operational work by the IMF have not been sufficient to restore the cooperative path envisioned at Bretton Woods.
- Structural reforms are required beyond IMF governance changes; sustained reform and institutional evolution are essential for the IMF to maintain its central role in international monetary cooperation.
- Regular allocation and better use of SDRs are discussed elsewhere in the piece (context): encouraging members with excess SDR holdings to lend or invest them (for example, into IMF trusts or prescribed holders) would add permanently to global liquidity and support national and global objectives such as climate mitigation and pandemic preparedness.
- Without decisive reforms—debt restructuring mechanisms, more resources, quota realignment, and open leadership selection—reviving international cooperation will be immensely hard and the world may look worse in five years.

*Martin Wolf — Finance & Development, June 2024.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2024/06/wolf.pdf_