The IMF and World Bank can no longer function as instruments that discipline some member countries while deferring to others. Their challenge is to transform the exercise of power among member countries into a framework of mutual respect and cooperation.
When Jakob Vestergaard and Robert Wade argued in their recent INET working Paper that the World Bank’s shareholding reform was “stuck,” they described more than an administrative failure. The deeper problem, shared by both the Bank and the IMF, is structural.
At its core lies what I have elsewhere called the Fundamental Asymmetry: the mismatch between nationally anchored policymaking and globally transmitted risks.
The IMF’s gap is one of accountability—it disciplines some but spares the most powerful—while the World Bank’s is one of representation, where voting power no longer reflects economic reality. Both express the same fault line: a governance order that distributes responsibility inversely to power.
Throughout this article, references to the IMF and World Bank refer to their governance frameworks and shareholder decisions, not to the management nor staff of the institutions, who operate within mandates set by their members.
From Stalemate to Structural Fault Line
The World Bank’s shareholding review illustrates the membership’s unresolved differences over representation. Since 2008, successive shareholding reviews have promised to realign voting power with the rise of emerging markets, yet each round has been diluted by veto rules that preserve legacy dominance.
At the IMF, the pattern is parallel. Quota reviews have become cyclical rituals—negotiated, delayed, and reopened with little substantive change.
Governance gridlock at both institutions stems from the same institutional imbalance: a shareholder structure that holds some members accountable without giving them voice, and grants others voice without equivalent accountability.
How Advanced Economies Could Need the IMF
The IMF’s leverage still derives primarily from its financing role. Countries that depend on its resources must accept conditionality; advanced economies, by contrast, remain insulated from it. On the other hand, Fund surveillance, while comprehensive, has limited traction where it carries no financial consequence. Its influence depends not on analytical strength but on members’ willingness to heed its advice—willingness that declines with economic power.
Yet advanced and systemic economies are not immune to risk. While they do not face liquidity shortages, they are exposed to confidence shocks, credibility issues, and systemic spillovers that no country can manage alone. A more reciprocal form of engagement—one that links surveillance to shared responsibilities rather than financial need—could make the Fund relevant to them as well, turning oversight into an instrument of mutual assurance rather than asymmetrical discipline.
In this light, the Fund could support its most systemically important members through non-financial facilities that deliver three forms of value—insurance, legitimacy, and coordination:
- Surplus economies could use coordinated fiscal arrangements under IMF auspices to legitimize expansionary policies otherwise seen as unilateral concessions.
- Resource-based economies could benefit from a transition facility that provides credibility insurance for fiscal transparency and diversification, cushioning market reactions to commodity-price volatility.
- Reserve-currency issuers could help multilateralize global liquidity support, embedding systemic backstops within Fund governance to enhance predictability and collective confidence.
These arrangements would depend on the willingness of systemic members to make multilateral cooperation a shared priority. In each case, the Fund would not substitute for national resources but act as a platform of credibility and coordination—a public good that even the most powerful economies cannot produce alone.
Overcoming the Stigma of Fund Engagement
Recasting the Fund in this role requires a change in how shareholders conceive it. The IMF should no longer be viewed as a lender of last resort for others, but as a standing institution for global financial stability.
The main obstacle to such a shift is stigma. IMF engagement is still associated with crisis and conditionality, and its surveillance is seen by many member as a periodic, intrusive exercise. As long as engagement signals distress and surveillance feels asymmetric, systemic members will remain reluctant to participate in the very institution designed to safeguard their collective stability.
To overcome this stigma, engagement must be reframed—not as a request for help, but as a contribution to global stability. Three institutional shifts could make this possible:
- Move from demand-driven to entitlement-based access. Access to Fund facilities or surveillance platforms should not depend on distress but on membership status. Systemically important economies and reserve-currency issuers could have standing eligibility for participation in insurance-type arrangements. Engagement would thus become routine, not exceptional.
- Make participation reputationally rewarding. The Fund could publish cooperation scorecards showing the extent of each systemic economy’s participation in surveillance, data transparency, and multilateral coordination. High ratings would enhance credibility and signal leadership; opting out, rather than opting in, would carry reputational cost.
- Institutionalize multilateral reciprocity. The Fund’s image as a lender to the weak stems from its one-sided history of conditionality. Embedding systemic liquidity backstops, peer reviews, and joint IMF–BIS–FSB monitoring within Fund governance would reposition it as a cooperative risk manager rather than a crisis firefighter. For powerful members, joining such frameworks would project responsibility, not vulnerability.
By transforming participation from an act of dependence into one of stewardship, the institution could turn engagement into a mark of shared responsibility—anchoring stability through reciprocity rather than hierarchy.
How Advanced Economies Could Need the World Bank
Major shareholders, too, treat the Bank as an institution for others.Yet the green and digital transitions are making it increasingly relevant to them as well.
The Bank’s balance sheet and convening power could provide insurance of a different kind—a platform for advanced economies to crowd in private capital and share political risk in financing global public goods. All shareholders could use the Bank to co-finance clean-energy or digitalization projects that strengthen supply-chain resilience. And as fiscal pressures rise, the Bank’s analytical and catalytic roles can also help richer members structure credible transition strategies, ensuring that climate and infrastructure finance complement debt sustainability rather than undermine it.
Also, in an age of geopolitical fragmentation, the Bank remains one of the few rules-based arenas where competing powers can collaborate without direct bilateral exposure. For them, participation offers multilateral legitimacy and a reputational buffer against politicized finance.
Reimagined in this way, the Bank—under shareholder direction—could transform from merely being a lender to developing countries into a credibility insurer for its shareholders. In fact, by doing so, it would reclaim its status as “World Bank”—a truly global institution.
The World Bank’s Representation Gap
If the IMF’s problem lies in who adjusts, the World Bank’s lies in who decides. Voting power and Board representation still mirror a post-war distribution of capital that no longer reflects the modern economy. The Bank now finances climate resilience and inclusion, yet its shareholder arrangements remain anchored in the 1945 capital structure.
Emerging markets generate most of global growth but remain underrepresented. As Vestergaard and Wade show, every capital increase has preserved existing shares, ensuring that no major shareholder’s weight declines.
Unless shareholders converge on a more representative formula, perceptions of legitimacy may erode precisely when a strong World Bank is most needed. The forthcoming 2025 shareholding review should therefore be treated not as an accounting exercise but as a legitimacy test—whether the Bank will remain the world’s cooperative financier or cede that role to fragmented regional arrangements.
The Fund’s Shift from Obligation to Reciprocity
Correcting these structural divides requires a move from unilateral obligations to reciprocal engagement. At the IMF, shareholders could evolve surveillance into a form of global insurance: access to facilities—financial or reputational—should depend on credible participation in surveillance, data transparency, and peer review.
At the World Bank, shareholders could link governance not only to capital contributions but also to participation in global public goods—concessional finance, climate funds, crisis buffers.
Both reforms would tie power to responsibility and voice to contribution, reviving the mutuality envisioned at Bretton Woods.
Toward a Bretton Woods “Symmetry Compact”
A coherent reform agenda could emerge if the membership of both institutions were to commit to a new Symmetry Compact: a twin commitment to rebalance representation at the Bank and accountability at the Fund.
SHAREHODER ACTIONS | |
At the IMF | At the World Bank |
Transform surveillance into reciprocal insurance, binding also on surplus and reserve economies | Link voting rights to contributions to global public goods and concessional resources |
Multilateralize liquidity backstops under IMF oversight | Create a Global Development Facility governed with parity between contributors and recipients |
Publish engagement scorecards for systemic economies | Publish regular transparency tables showing how each member’s economic weight compares with its voting power |
Incentivize surplus economies through access to insurance and credibility benefits | Incentivize advanced shareholders through reputational and fiscal recognition for alignment |
Such a compact would align incentives across the Bretton Woods institutions, anchoring global cooperation in shared responsibility.
The Politics of Feasibility
Skeptics will argue that neither surplus economies nor dominant shareholders will willingly surrender privileges. Yet history shows that crisis windows shift incentives. From Korea’s 1997 crisis to Switzerland’s 2008 banking turmoil and the U.S. swap lines of 2020, each episode underscored a simple truth: no economy is permanently immune. IMF support should be designed so that cooperation feels like protection, not constraint, before the next crisis strikes.
The same logic applies to the World Bank. Major shareholders may appear insulated, yet they increasingly rely on the Bank’s legitimacy and balance sheet to coordinate global-scale investments that no single nation can finance or legitimize alone. The reconstruction of Ukraine, the climate transition, and global health preparedness are all examples of cross-border challenges where private capital needs multilateral anchors and where national aid budgets require a credible intermediary.
From Power Wielding to Mutuality
The IMF and World Bank can no longer function as instruments that discipline some member countries while deferring to others. Their challenge is to transform the exercise of power among member countries into a framework of mutual respect and cooperation:
- At the IMF, by making surveillance reciprocal and valuable even for the powerful.
- At the World Bank, by linking governance and lending to measurable contributions to shared global goals.
- Across both, by embedding cooperation in a global insurance architecture that rewards transparency, contribution, and systemic accountability.
Only by redressing the Fundamental Asymmetry—through shareholder decisions—can the Bretton Woods institutions recover their twin vocation: to provide the world not merely with liquidity and loans, but with legitimacy and shared security.
The author has served as an external expert for independent evaluations of IMF and World Bank governance. He writes here in a strictly personal capacity.
