Jason Reed / REUTERS IMF Managing Director Christine Lagarde in Washington, July 2012.

The IMF’s Next Five Years

No Rest for the Weary

Last week, the International Monetary Fund announced that it had reappointed Christine Lagarde to a second five-year term as managing director. Lagarde took the helm of the IMF in July 2011, at a moment of deep institutional turbulence: former Managing Director Dominique Strauss-Kahn had recently resigned; the Greek bailout effort, which the IMF had designed and strongly supported, was on the brink of failure; and the fund’s decision to front one-third of all financing for Europe’s rescue packages had been harshly criticized by emerging-market IMF members as a special deal for the West. Meanwhile, as the global financial crisis began to recede, policy coordination among the major industrial economies became less pressing, and the fund’s efforts to offer policy advice outside of its financial programs ran out of steam. In short, it was unclear whether the IMF would be able to deal with threats then facing the global economy.

As the close of Lagarde’s first term approaches, a brighter assessment is possible. A global recovery has taken hold, and although most of the credit should go to national governments and central bankers, the IMF’s steady support for the European periphery played an important role. The fund has also made progress in granting emerging-market countries greater institutional representation and has improved the breadth and depth of its analysis of the global economy. The next five years, however, will bring new challenges as the fund struggles to come to terms with a rapidly changing global marketplace and with lending rules poorly suited for the crises the institution will likely face.

WHAT WENT RIGHT, WHAT WENT WRONG

Any assessment of the IMF’s performance during Lagarde’s first term has to start with the organization’s role in the European crisis—a role that has been subject to much analysis, including by the IMF itself. The fund’s view, which is largely correct, is that the institution deserves credit for a rapid response that helped stem the panic, shore up

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