the IMF. The same capital investment would leverage more influence if made within the
IMF than outside it, or in parallel to it.
Our paper carries also carries some additional implications for the reform of the World
Bank and the International Monetary Fund. We have seen how the IMF has strengthened
its ability to respond to the sudden emergence of financial crises. Moreover, other
measures designed to improve the ability of the institution to prevent financial crises
from occurring have been taken, Finally, in the case of other crises occurring, steps to
more fully involve the private sector in their resolution have been envisaged (Fisher,
1999b; Fischer and Citrin, 2001). The recent agreement on widespread use of collective
action clauses in new bonds issue is another important step in this direction, a step that
seemed out of reach only a couple of years ago. There is still a long way before the
reform of the IMF is, if it ever will be, completed. However, the International Monetary
Fund holds a clear place in the new financial architecture and has shown at least some
significant ability to react to emerging financial instability by increasing its lending and
dishing out its policy advice.
The role of the World Bank in the global financial architecture is, instead. a source of
greater concern. Its lending has shrunk as a percentage of borrowing countries GDP.
Private capital markets have relegated it to a marginal role as a global financial
intermediary. Even in Sub Saharan Africa, a region not particularly able to tap private
capital markets, the World Bank Group has lost ground. In good times, developing
countries tend to turn to private markets where capital is plentiful and available without
too many strings attached. In bad and dangerous times, they turn to the IMF for finance
and advice. What is left to do for the World Bank as a financial institution is not much18.
18 Johm McCloy, the World Bank second president was quoted to say that “the Bank would go out of
business in due course because the long-term capital needed for development would eventually be provided
directly by private investors”. See Rodrik (1995).
18