Transforming International Financial Institutions

The global financial system, from foreign currency exchange rates to national, regional, and global economic policy, is governed by a web of institutions, policies, rules, and practices known as the international financial architecture. Within that architecture, international financial institutions (IFIs) such as the World Bank Group, the International Monetary Fund (IMF), and regional development banks (RDBs) are vital conveners and facilitators of financing for development and serve as critical partners to governments in developing countries through capacity-building, strategy-setting, technical expertise, and implementation support. Public development banks, including RDBs and national development banks, hold a combined USD 23 trillion in assets that can be leveraged to accelerate economic growth and meet the targets of the UN Sustainable Development Goals (SDGs). However, the credibility and effectiveness of IFIs are increasingly under scrutiny as they struggle to help governments ameliorate complex problems such as worsening socioeconomic inequalities, climate change, conflict, and geopolitical fragmentation.

Adding more chairs for developing and Global South countries is an important first step toward addressing persistent inequalities. However, deeper reform could involve broadening representation beyond states. The inclusion of CSOs and relevant private-sector actors on executive boards could move international financial institutions toward a more polylateral model of governance — similar to the UN Climate Change Conferences (COP) — that includes non-state actors and recognizes them as vital stakeholders. As Margaux Day, executive director of Accountability Counsel, noted in an interview with FP Analytics, “The people who bear the most risk [from IFI policies] are not centered in the decision making,” causing “already marginalized communities to become further marginalized.”

As Margaux Day, executive director of Accountability Counsel, shared, “It does take a wide spectrum to move such a vast ecosystem towards truly protecting people and planet.” Effective global economic governance will not only require responding to shifts in geopolitical and economic power, supporting the continued growth of emerging markets, and renewing investment in global public goods and cross-border challenges, but also accountability to potential negative impacts.

Read the full analysis from FP Analytics here.