The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refile to fix typo in second paragraph.

By Felix Martin

LONDON, April 16 (Reuters Breakingviews) - The International Monetary Fund staggered into the 78th edition of its spring meetings this week facing accusations that it is out of date, overly politicised, or simply irrelevant. Even so, Managing Director Kristalina Georgieva’s curtain-raiser speech was notably upbeat. Cynics will detect a connection between her optimism and the heavily downgraded global growth forecasts she unveiled due to what the International Energy Agency has dubbed the worst energy crisis ever recorded. For a global financial fire-fighting institution, increased risk means increased relevance. Yet Georgieva has a more straightforward reason to be positive: she is confident that the U.S. Congress will soon authorise the long-delayed 50% increase in members’ quotas approved by the IMF’s Board of Governors back in December 2023.

That would represent a significant coup if it happens. American support for any component of the post-World War Two international architecture is vanishingly rare these days. President Donald Trump ignored the World Trade Organization in declaring his global tariff war, bypassed the United Nations Security Council in launching his military adventures in Venezuela and Iran, and has even threatened to leave its primary multilateral defence alliance, the North Atlantic Treaty Organization.

Corroboration of U.S. support for the IMF came from Treasury Secretary Scott Bessent. Speaking at a summit convened by the Institute of International Finance on Tuesday, Trump’s chief financial envoy repeated the demands he made last year that the IMF forswear its dalliances with environmental and gender issues. He also had a swipe at some of the institution’s more anachronistic privileges, quipping that the fund should “get rid of their golf club in Maryland” – a reference to the Bretton Woods Country Club whose pétanque pistes, swimming pools, and miniature golf course have long enraged the Trump White House. Yet Bessent also commended the IMF for its assistance to Argentina and Venezuela, applauded its newfound resolve to criticise creditor nations in flagship research on global imbalances published this month, and confirmed the administration’s fundamental support for an institution refocused on monitoring the international financial system and stabilising countries in crisis.

It’s a sharp reversal from the early days of Trump’s second presidency, when policymakers feared the U.S. might withdraw from the institution. Yet despite Georgieva’s deft management of her shareholders, the IMF still faces nagging existential questions regarding its relevance and role.

The first is how the IMF’s core lending services can remain relevant in an international financial system that has been transformed beyond recognition since it was founded. The fund was born in a world of fixed exchange rates and minimal international capital mobility which generated a natural demand for borrowing by members to smooth shortfalls in their balance of payments. Today, the vast majority of members operate flexible exchange rate regimes which make currency depreciation the adjustment mechanism of first resort. The fund’s balance sheet is also dwarfed by the scale of private capital markets to which all but its poorest members have access. Even when a country needs help with an overdraft, the IMF faces stiff competition from its own leading shareholders. China has constructed a network of nearly 40 bilateral swap agreements and emergency lending facilities with the central banks of developing countries. It extended $185 billion of emergency liquidity support between 2016 and 2021, according to research by the AidData research lab at William & Mary. The U.S. Federal Reserve has put in place even more massive standing swap and repo facilities with its allies’ central banks. The IMF’s centrality to international finance is not what it was.

A second question hangs over the IMF’s ability to provide global economic surveillance and effective policy advice – functions in which the institution has increasingly located its purpose as its financial clout has waned. There is no doubt that the fund is richly resourced and uniquely placed to fulfil them. Yet recent research has struggled to identify the concrete impact of the IMF’s regular Article IV economic health checks of its members on either asset prices or domestic policies, and its leading shareholders no longer agree on what constitutes orthodox macroeconomic policy advice. The so-called Washington Consensus that governed economic and financial relations has disintegrated in the face of “America First“ protectionism, China’s Dual Circulation mercantilism, and the EU’s climate-focused European Green Deal. Such divergent economic philosophies will make it much more difficult for the IMF to adopt consistent policy positions in future.

A third pressing question is how the IMF can retain legitimacy and effectiveness in today’s fragmenting geopolitical order. On this front, the current U.S. administration’s demand that it curtail its recent forays into climate change and gender policy is likely to be the easy part. Much trickier will be avoiding operational paralysis if the fund’s major shareholders continue to descend into cold – and perhaps even hot – wars. The super-sized bailouts of euro zone countries in the 2010s were crafted in an age in which relations between the U.S., EU, and China were more harmonious. Even the $20 billion extension to Argentina’s record-breaking IMF programme, championed by the U.S. last year, was agreed before the precipitous deterioration in transatlantic and transpacific relations. It’s far from certain such interventions would get such an easy ride from the fund’s ever more fractious membership today.

Georgieva’s planned quota increase will not move the needle on the first of these challenges, and doesn’t touch the second or the third. Nevertheless, there is one indispensable function which this week’s meetings in Washington, DC once again demonstrated the IMF is still uniquely qualified to perform. Regardless of its reduced financial heft – and precisely because today’s world order is ever more contested – the annual confab is the only forum in which all the world’s key economic policy-makers are able to gather informally, confer discreetly, and strike deals face-to-face. For a U.S. administration helmed by the chatelain of power-brokers’ haunts such as Trump’s Mar-a-Lago and Turnberry resorts, the value of that proposition should be obvious. The IMF’s cheerleaders should therefore not take Bessent’s jibes at the Bretton Woods Country Club in Maryland too seriously. What really matters is his support for the one in the District of Columbia.

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