Rationale

The International Financial Architecture (IFA) is made up of institutions, markets, arrangements, policies, rules, and practices that promote international cooperation with a view to ensuring global monetary and financial stability. The IFA is critical to enabling international trade and investment, and mobilizing the financing required for sustainable development, including combatting the climate crisis.

Much of the IFA as it is today originates from a time when most of today’s member states were not independent and when climate risks or social inequalities, including gender equality, were not considered pre-eminent development challenges. The major formative milestone for today’s IFA was a World War II era (1944) conference of 44 then world leaders, which led to the Bretton Woods Agreement, and the formation of two of the IFA’s critical components – the International Monetary Fund (IMF) and the World Bank. The first iterations of the IFA contained inherent structural deficiencies even from the start. It has evolved over time, often in an ad hoc fashion, driven by the policy preferences of large economies in response to economic and financial shocks and crises.

Today’s IFA is increasingly at odds with the reality and needs of the world today, making it entirely unfit for purpose in a world characterized by unrelenting climate change, increasing systemic risks, extreme inequality, highly integrated financial markets vulnerable to cross-border contagion, and dramatic demographics, technological, economic, and geopolitical changes.