Reforms in International Monetary Fund (IMF): Challenges and the Road Ahead

Abstract

A prosperous and stable world economy is in the self-interest of every nation. The International Monetary Fund (IMF), which is a worldwide institution that facilitates prosperity and stability, was founded in 1944 to restructure the world economy ruined by the Second World War and to design the postwar international monetary system. Since its inception, IMF has been playing an important role in the promotion of world trade and solving Balance of Payments (BOP) difficulties of its member countries, especially the developing ones. Despite its significant contribution, the IMF has been severely criticized by academics, politicians, and public interest groups on the grounds that it is dominated by the developed nations, and hence better serves the interest of the wealthy nations as opposed to the world’s poor majority. Even after several reforms introduced over a period of 70 years to improve and strengthen the representation of the developing countries, there are four critical issues that are yet to be addressed: dominance, governance, loan conditionality, and quota system. In this context, this paper aims to study the reforms introduced by the IMF over the years, analyze the key areas where reforms are still needed in the light of existing criticisms directed at the IMF’s functioning and governance, and suggest the direction of reforms to address the prevailing challenges faced by the IMF.