The World Bank and IMF are two of the three institutional pillars of globalization, and today they face compelling trends pushing them to change. In this CGD Brief, Ngaire Woods, author of The Globalizers: The IMF, the World Bank, and Their Borrowers, describes those trends and offers practical advice about how the global development institutions can reform. Woods says the World Bank and IMF’s income is running out, since emerging market borrowers, like Brazil and Argentina, have repaid their loans and are not borrowing as much as in the 1980s. As financing from the private sector proves to be less onerous and less political, their clients are turning elsewhere. Additionally, the conditionality that the World Bank and IMF espoused has not worked, but has not yet been replaced. Lastly, the IMF and the World Bank cannot be impartial advisors. A common complaint in the field is that the Fund and Bank staff have no policy experience, and that their advice is highly politicized. As a result, the institutions are being assailed for lacking legitimacy, independence and effectiveness.
Woods says that a useful future is assured for each if they focus their eyes and ears on their borrowers, contribute to rather than hijack policy debates, involve borrowers in their decision-making, and focus on those roles for which each has a unique capacity. That will not just require that the staff and management break long-held habits. It will also require the wealthiest shareholders of each institution to positively push for these reforms.
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