Vicious fighting is tearing eastern Europe, there are mounting fears of escalation in east Asia, and Western states are worried about the role the major totalitarian powers could play in a post-conflict economic and financial system.
This could stand as a rough summary of the outlook in October 2024. It applies equally to the middle of 1944, when World War II was still raging and Allied political leaders were trying to plan for a better future.
Direct comparisons across those eight decades are tricky, but these echoes are being heard at events marking the 80th anniversary of the International Monetary Fund. They began on July 1, which in 1944 marked the opening of the Bretton Woods conference that led to the founding of the International Monetary Fund and World Bank.
As today’s generation of finance ministers and central bankers gather in Washington, they too will be looking to carve a route to a post-war economic system that accommodates the needs and desires of China and other non-Western countries.
This will be a central part of Kristalina Georgieva’s agenda for her second term as IMF managing director, after being reappointed in April 2024.
She will be keen to push through a programme that leaves a legacy for her 10 years at the helm. But she must deal with a host of challenges, ranging from the state of the global economy and the Fund’s place in the morphing global financial architecture to the thorny issue of countries’ stakes and voting power.
De-globalisation
The world economy is ostensibly on the mend, with a meagre but stable growth forecast and inflation on a downward trend. But a threat hangs over the outlook: the risk of fragmentation, with countries increasingly imposing unilateral tariffs or protectionist industrial policies.
Pierre-Olivier Gourinchas, chief economist of the IMF, points to an “explosion” in trade-restrictive measures.
Monitoring service Global Trade Alert has counted well over 2,000 new harmful trade interventions by governments so far this year (albeit offset by around 750 liberalising measures), compared with around 800 in 2019. The IMF estimates further trade barriers could carry a long term cost of 7% of global GDP.
As Gourinchas said over the summer, this surge of intervention is likely to “distort trade and resource allocation, spur retaliation, weaken growth and make it harder to coordinate policies that address global challenges”.
He did not mention specific countries. But there is growing concern about the US, which is expected to impose further tariffs on China, especially if Donald Trump becomes president again in November. This would be an attempt to stem America’s deepening current account deficit with its largest source of imports.
Ariane Curtis, senior global economist at Capital Economics, says widening global imbalances have become “another faultline” in the global economy. “Tariffs could increase by even more if Trump were to be elected,” she says, “which could have a significant impact on the timeline and shape of the future fracturing of the world economy.”
Rivals at the gates
The IMF’s leaders are certain to avoid talking about US trade policy so close to the presidential election. But there are other tensions on Georgieva’s radar. For some years now, the IMF has lost its monopoly as provider of finance to help states through economic and financial crises.
Last month the Forum on China-Africa Cooperation in Beijing was attended by 51 African heads of state and government. China pledged Rmb360bn ($51bn) over the next three years: Rmb210bn of credit lines, Rmb80bn of assistance and Rmb70bn of investment by Chinese companies.
That amounts to sizeable funding, although China has not gone as far as to offer broad relief on the estimated $182bn of loans it made between 2020 and 2023.
As Tighisti Amare and Alex Vine of Chatham House’s Africa Programme point out, China is showing its ability to provide direct funding without the conditions required of borrowers under multilateral aid. In doing so, it is also trying to build “alliances against a US-led West”.
Asked how the Fund might respond to this new wave of alternative financing, Julie Kozack, the IMF’s communications director, said its economists were updating their assessment for their African regional economic outlook and there would be “more to come” at this week’s annual meetings.
Debt and credit
The IMF also wants to take concrete steps to improve the way it provides support to low income countries. Georgieva has warned LICs need $820bn over the next five years to cover projected current account deficits and external debt repayments.
The IMF has taken a three-pronged approach: helping with domestic reform to raise tax revenues; encouraging more international funding for tools such as its Poverty Reduction and Growth Trust; and improving how debt crises are handled.
The IMF has had some success with the third prong: earlier this year Zambia agreed a deal to restructure its $14bn debt, three years after it defaulted.
The deal was guided by the Common Framework for Debt Treatments, set up by the G20 to facilitate the resolution of private and public debts, but Georgieva has said more needs to be done.
The process took more than three years as China, other official creditors and private bondholders argued over a fair sharing of the losses.
Hung Tran, a non-resident senior fellow at the Atlantic Council’s GeoEconomics Center, says the Fund needs to be “more ambitious”.
“Its debt restructuring negotiation process should be expanded to include both official and private sector creditors at the same time,” he says, “either all together in a comprehensive session, or in parallel, with timely communication between them.”
Tran, a former IMF deputy director, also argues the Framework’s coverage should be widened to include vulnerable middle income countries like Sri Lanka and Pakistan.
A sore issue between the IMF and its borrowers for years has been surcharges, paid when a loan exceeds a certain level or is repaid late.
The Atlantic Council had estimated that total surcharges would amount to $13bn between 2024 and 2033. Surcharges have substantially increased the payment burdens on countries in economic distress and depleted their dwindling foreign exchange reserves. Development advocates have called for their abolition.
On the eve of the Annual Meetings, the IMF approved changes to the rules that it said would reduce its members’ borrowing costs by about $1.2bn a year. Georgieva said the number of countries subject to surcharges in fiscal 2026 would fall from 20 to 13.
Tran says the reforms will be useful to countries now subject to surcharges, but are unlikely to completely silence demands for abolition.
“The surcharge policy is not consistent with the basic tenet of the Fund, i.e. acting as a mutual help organisation to assist — with financing at concessionary interest rates — a member in need to overcome its crisis,” he argues. “The policy should be abandoned — especially as the IMF doesn’t need the surcharge income to maintain adequate precautionary balances.”
Washington’s Center for Economic and Policy Research is another critical opponent. “The IMF’s decision this week is a small step forward,” says Mark Weisbrot, its co-director, “but there really is no way to justify these surcharges on countries that are already heavily indebted, and thereby increasing their risks of debt crises, as well as human suffering.”
He points out that the IMF received net income of $6.8bn over the past 12 months, more than three times the average of the past four years. “Annual surcharge revenue is a fraction of that and is not needed. If needed, the Fund could revalue its gold reserves — this could by itself replace surcharge revenue for decades.”
Quota and voice
The seemingly never-ending argument over how to share voting power between members is likely to resurface this week, following the partial resolution of the issue a year ago. After the annual meeting in Marrakech, the IMF approved a proposal for a 50% increase in the quotas of all members.
While this strengthens the IMF’s permanent resources and reduces the reliance on borrowing — the share of quotas in total resources will rise from 49% to around 70% — it has done nothing to affect the imbalance between members’ economic weights and their voting power.
For example, China, the second largest economy, has a voting share of just over 6%; the US has a quota of 16.5% (crucially, enough to block any measure that requires 85% approval). A particular bugbear for emerging economies is the power of the 27 countries of the European Union, which hold a 29.4% share of the votes, nearly twice their 15% share of world GDP.
Approving the 50% enlargement, the IMF’s governors asked officers to explore “possible approaches” by June 2025 as a guide for a further quota realignment, under what would be the 17th quota review.
Many longstanding critics are sceptical. In a paper for the Bretton Woods Project, an NGO network, Paulo Nogueira Batista, a former vice-president of the New Development Bank, said the idea of the IMF as a global financial body with universal reach was at odds with its “skewed” decision-making process.
“This was not unexpected at all,” says Nogueira Batista, an IMF executive director from 2007 to 2015. “This amounts to kicking the can down the road. The further failure of another attempt at reform is undeniably a considerable, even if not lethal blow to the Fund’s credibility.”
The imbalance is principally in favour of European countries. Consequently, Europe would need to bear the brunt of any sacrifice of control. For meaningful reform to take place, wealthy European nations would need to relinquish a significant portion of their quota shares, with most of them redistributed to China and other middle income countries in Asia.
There is some better news. In August the board of governors confirmed the creation of a new member of its executive board to represent sub-Saharan Africa, who will take office on November 1. As Nogueira Batista says, this will significantly increase the voice of this region in the executive board and the politicians’ International Monetary and Financial Committee.
Tran says that despite the intense geopolitical difficulties that beset the IMF, there is a chance that this week could produce meaningful agreements. As he puts it: “Such an opportunity is not to be missed.”