The IMF and the Challenge of Relevance in the International Financial Architecture

The paper reviews the role of the IMF since its inception in 1944 and discusses some of the challenges for the IMF, and the international community more broadly, arising from recent developments in the world economy. It proposes that the IMF's role up to the end of the 1970s evolved in a broadly sensible fashion. However, the string of major crises of the past decade, and the associated reassessment of how to maintain international financial stability, has seen significant questioning of the role of the Fund. The paper argues that, at one level, recent criticisms of the IMF have been unfair but that there is also a legitimate basis for some criticism. The paper suggests that the IMF must continue to evolve as the world changes and that the choices it makes now in response to pressures for further change will determine its future relevance to the international financial system. It is argued that appropriate governance arrangements will be important to resolve tensions within the IMF about its future role, suggesting the need for engagement by the Fund's national government shareholders and other institutions within the international financial architecture, such as the G-7 and G-20.