The global financial system, from foreign currency exchange rates to national, regional, and global economic policy, is governed by a web of institutions, policies, rules, and practices known as the international financial architecture. Within that architecture, international financial institutions (IFIs) such as the World Bank Group, the International Monetary Fund (IMF), and regional development banks (RDBs) are vital conveners and facilitators of financing for development and serve as critical partners to governments in developing countries through capacity-building, strategy-setting, technical expertise, and implementation support. Public development banks, including RDBs and national development banks, hold a combined USD 23 trillion in assets that can be leveraged to accelerate economic growth and meet the targets of the UN Sustainable Development Goals (SDGs). However, the credibility and effectiveness of IFIs are increasingly under scrutiny as they struggle to help governments ameliorate complex problems such as worsening socioeconomic inequalities, climate change, conflict, and geopolitical fragmentation.

The current policies and practices of IFIs present several challenges: they drive increasingly burdensome public debt for many developing economies, retain governance structures that often privilege the voices and decision-making of Global North countries, and have a history of promoting policies that deepen inequality and reduce the fiscal space for long-term investment in public goods. In order to improve the quality of life of all communities and achieve lasting development outcomes, “tinkering at the margins” of the governance of the international financial architecture—in the words of the Bridgetown Initiative—is no longer enough. Instead, to transform the international development ecosystem and support a more just global economic system, stakeholders across the public, private and multilateral sectors need to take action to reimagine IFIs, implementing the ambitious proposals being put forward by scholars, civil society representatives, and historically marginalized Global South leaders. To date, change has been stymied by numerous obstacles, including stagnant institutions and the interests of the Global North and the private sector. However, in 2025 the global community is building momentum for change. Civil society movements are making the voices and demands of marginalized communities heard on the global stage, while a range of institutions and leaders, from the UN Secretary General to the G20, are pushing for change through a series of ambitious agendas and proposals.

Anchoring the third installment of Global Governance Reimagined, this issue brief explores the history and evolution of IFIs with a focus on the Bretton Woods Institutions (BWIs)—the World Bank and IMF—and analyzes their ability to meet contemporary and future global development needs. The analysis highlights opportunities to reform their governance and operations in order to more effectively address the challenges these institutions face. The brief is accompanied by contributions from Dr. Iyabo Masha, Minh-Thu Pham, and Rebeca Grynspan, experts who are closely involved in the work of reimagining and reforming global governance.

IFIs struggle to support the needs of developing countries and address complex challenges

Established over 80 years ago, the BWIs were not designed to support the needs and growth of post-colonial and developing economies. Civil society organizations (CSOs), scholars, and representatives from Global South governments, including the Bretton Woods Project, the Jubilee Report, and the Bridgetown Initiative, emphasize that the imbalanced governance structures and lending approaches inherent in the BWIs’ origins contribute to many of the challenges facing the development financing landscape today. These longstanding challenges include the debt crisis and the erosion of governments’ ability to shape and implement context-appropriate domestic development strategies. As the Stimson Center notes, the result is a loss of legitimacy and lack of trust in these institutions, reflected in the emergence of new Southern-led multilateral development banks (MDBs) as well as calls for reform to governance, voting power, and loan-making by Global South-led initiatives such as the V20 Accra to Marrakesh Agenda.

In 2021, the G20 was given a mandate to review the capitalization of MDBs, including the World Bank and IMF, and is also currently undertaking a review of its own Common Framework on Debt Relief in light of concerns that its process was too slow and unwieldy. In a policy brief on the international financial architecture more broadly, UN Secretary-General Guterres recognized that the system was failing a “stress test of historic proportions” and would result in “lasting divergence, economic fragmentation and geopolitical fractures” in the absence of significant reform. He made the case for transforming the governance of IFIs, lowering the cost of sovereign borrowing, and scaling up finance for development and climate mitigation. Crucially, the BWIs are expected to share the findings of the BWI@80 initiative—exploring how these institutions can best support international stability and address future global challenges—during the 2025 Annual Meetings. Additionally, multiple action points within the 2024 Pact for the Future focus on IFI reform to increase representation of developing countries and improve sustainable financing.

In response to this multistakeholder call for reform, and with the 2030 deadline for completion of the SDGs approaching rapidly, IFIs, particularly the World Bank and IMF, need to address the concerns of their members, the communities they serve, and the wider UN system. In particular, more equitable, effective governance of the IFIs needs to address the lack of representation and decision-making power of borrower and aid-receiving countries; how to increase lending capacity without incurring debt; and the impact and legacy of economic policies that have undermined growth and quality of life.

The Global Financial System

The global financial system has grown increasingly complex over recent decades. Unequal representation and balance of voting power are ingrained in the governance of IFIs.

Systemic shifts in the governance and operations of IFIs are needed to achieve an equitable international financial architecture

There is broad consensus that IFIs, including MDBs, need to make systemic changes that support climate and sustainability goals, promote human rights, and prioritize the perspectives and voices of previously underrepresented and underserved groups and nations. Separate from the ambitious goals of the UN80 process, reviews underway within IFIs also offer an opportunity for these institutions to reflect on imbalances within their governance. As part of the IMF’s 16^th Quota Review in 2023, the review board tasked the Fund with developing a new quota formula by 2025 “to better reflect members’ relative positions in the world economy, while protecting the quota shares of the poorest members”, a process that is ongoing at the time of publication. The World Bank is undertaking reform through the Evolution Roadmap, launched at the request of shareholders in 2022, and the 2025 Shareholding Review, which seeks to achieve a more equitable balance of voting power, the results of which will be presented at the October 2025 Annual Meetings.

These internal reviews provide an opportunity for the BWIs to address policy and governance issues that undermine inclusive and sustainable development. Effective reform will require consideration and integration of solutions proposed by civil society, grassroots organizations, and borrower country governments, with a particular focus on the needs and priorities of the Global South, to adequately address historic imbalances.

Integrating perspectives of Global South and developing countries is needed for better global economic governance

Public development banks differ from traditional lending institutions in that their mandates are typically to reduce poverty, support sustainable development, and address shared global challenges. Yet, often, their governance structures—described by the Bretton Woods Project as a “one-dollar, one-vote system”—place decision-making power in the hands of those who contribute the most resources rather than those who depend on their support and services.

Recognizing that governance issues impede the BWIs from realizing their full potential, governments from the Global South have pushed for reform. The Group of 77—the largest coalition of developing countries in the UN—issued a statement ahead of the 2025 World Bank Shareholding Review calling for the Bank to “enhance the voice of underrepresented developing countries, while accurately reflecting the evolving dynamics of the global economy.” This call, as well as those to reform the IMF, are urgent given the expanding gap between official development assistance (ODA) and developing countries’ financial needs to achieve their SDGs.

IMF Quota Share Scenarios

Changes to the IMF’s Calculated Quota Share (CQS) formula could increase the power and voice of borrower countries and reduce economic inequality

The International Monetary Fund (IMF) uses a quota formula to decide each member country’s financial contribution, voting power, and borrowing capacity. The formula reflects a country’s economic size, its role in global trade and finance, and its ability to support the international system.

Under the current formula, advanced economies hold the majority of calculated shares, while Emerging Market and Developing Economies (EMDEs) have smaller but growing shares as their economies expand over time.

However, actual calculated quotas are subject to political negotiations that often favor older allocations, and thus actual quotas have not kept pace with global economic change. As a result, advanced economies remain overrepresented, and EMDEs hold smaller actual shares than their economic size would suggest.

The G24—a subset of the G77 focused on international monetary issues—has advocated to eliminate or reduce the influence of nominal GDP in favor of PPP. If GDP were measured only by PPP, EMDEs would gain a much larger share, since their economies are bigger when local price differences are taken into account. 

The IMF’s openness variable effectively double counts cross-border trade flows, producing biased results in favor of Advanced Economies relative to GDP. Eliminating the openness variable and distributing the variable’s’ weight evenly to GDP, economic variability, and reserves would increase EMDE shares and reduce the advantage of highly trade-focused countries.

While adjustments to the IMF quota formula can shift voting power between countries, structural features like basic votes also play a critical role in ensuring fair representation. 

Basic votes guarantee all members a minimum level of influence, providing smaller and developing economies with a meaningful voice in IMF decision-making. Basic votes currently represent about 5.5 percent of total voting power, a significant decline from a peak of 15.6 percent in 1958. The G77 and China have called for increasing basic votes to 11 percent, while CSOs and activists have called for raising it as high as 20 percent.

Data sources: IMF, authors’ calculations.

CSOs including the Bretton Woods Project, One World Trust, and the South Centre have proposed various reforms to the voting and decision-making processes at the IMF and World Bank, including increasing basic votes, introducing double majority voting, and adjusting the allocation of voting power at these institutions to better reflect current global economic realities. These proposed reforms are intended to strengthen the voice of smaller and developing countries and encourage more inclusive, consensus-based governance—indeed, double majority voting was endorsed by Secretary General Guterres in the Our Common Agenda initiative, launched in 2021. Regional development banks (RDBs), like the AfDB, where borrower countries hold roughly 60 percent of total voting power, offer concrete examples of how such reforms can rebalance power. Nevertheless, the governance structures of RDBs, including the AfDB, IDB, and ADB, are far from fully equitable or inclusive as they still give a significant amount of voting power to creditor countries.

There are also efforts to increase Global South representation in the leadership and management of the Bretton Woods Institutions, as the number of seats on the boards of the IMF and World Bank has not kept pace with the expansion of membership. Expanding leadership opportunities, such as creating an additional executive director position specifically for climate-vulnerable countries, would provide underrepresented nations a more formal role in shaping policies that directly affect their economic and climate resilience. As the Managing Director of Climate Vulnerable Forum–Vulnerable Twenty Group (CVF–V20), Sara Jane Ahmed explained, “Having another Executive Director office or the opportunity to head committees would create space for countries most affected by climate change to ensure policies better reflect their priorities and challenges.” In 2010, following advocacy by organizations including the G24, the World Bank added a third chair for sub-Saharan Africa, and the IMF followed suit in 2024. These changes helped ease the burden on the sub-Saharan African directors but they do not adequately reflect the growing power and potential of the region in terms of contribution to the global economy or population.

Adding more chairs for developing and Global South countries is an important first step toward addressing persistent inequalities. However, deeper reform could involve broadening representation beyond states. The inclusion of CSOs and relevant private-sector actors on executive boards could move international financial institutions toward a more polylateral model of governance—similar to the UN Climate Change Conferences (COP)—that includes non-state actors and recognizes them as vital stakeholders. As Margaux Day, executive director of Accountability Counsel, noted in an interview with FP Analytics, “The people who bear the most risk [from IFI policies] are not centered in the decision making,” causing “already marginalized communities to become further marginalized.”

In the absence of a formal seat at the table, CSOs are making their voices heard through coalitions. The Civil Society Policy Forum (CSPF) convenes organizations from around the world for policy discussion and exchange with IFI staff during the Spring and Annual meetings of the World Bank and IMF, and the Civil Society Financing for Development Mechanism serves as a similar forum ahead of the International Financing for Development conferences. The Civil Society Forum Declaration issued before the 2025 Seville conference (FfD4) called for the IMF, World Bank, and other MDBs to be fully brought into the UN System in order to strengthen democratic governance and accountability—one example of how CSOs can chart a forward-looking reform agenda for IFIs.

Restoring IFIs’ credibility will depend on lending being more responsive to country needs

The credibility of the BWIs has been eroded by decades of lending practices that too often failed to meet countries’ needs, such as attaching policy reforms to loans. These so-called conditionalities included achieving balanced budgets, higher reserves, and limits on domestic credit expansion, and later, liberalization, privatization, and austerity measures known as Structural Adjustment Programs (SAPs). Eurodad emphasizes that the legacy of these policies undermines sovereignty in recipient states, restricts recipient governments’ fiscal space, and prioritizes market-based solutions at the expense of developing state capacity. As Kevin Gallagher, director of the Boston University Global Development Policy Center (BU GDP Center), noted in an interview with FP Analytics, “After 40 years of experimenting with [neoliberal policies], we realize that they have led to high levels of inequality across and within countries, and climate and other disasters.” This has manifested in a loss of trust in the international financial architecture: according to a 2025 public opinion poll conducted in 34 countries by the Rockefeller Foundation, just 44 percent of respondents had “a great deal” of or “some” trust in the IMF.

In light of these impacts, experts propose replacing standardized approaches with more flexible, context-sensitive frameworks for conditionality. Such models emphasize country ownership and domestic consensus in reform design, ensuring alignment with national development priorities and local political realities. Flexibility is especially critical in times of crisis, when rigid conditionality often reinforces austerity, as Eurodad notes. Instead, as proposed by members of International Development Economics Associates (IDEAs), revised frameworks would prioritize safeguarding public expenditure—particularly in health and education—to support sustainable, growth-friendly adjustment. This shift seeks to expand the policy space available to developing states, enabling them to manage economic challenges more effectively and equitably while avoiding the social costs historically associated with rigid conditionality.

Concerns over conditionality are compounded by IMF surcharges. These fees, charged to countries that draw heavily on Fund credit to manage debt distress or balance of payments pressures, place additional strain on economies already in crisis and risk creating untenable debt burdens. The G20 Brazilian Presidency’s Task Force 3 noted that between 2020 and 2023, the number of countries paying IMF surcharges more than doubled from 10 to 22, with cumulative surcharges during that period reaching around USD 6.4 billion. Organizations including the G20 Task Force 3 and the BU GDP Center advocate for removing surcharges entirely, arguing that the income they bring to the IMF is negligible compared to the fiscal space that would be created within borrower countries if they no longer had to prioritize the repayment of interest.

Increasing IFI lending capacity is essential to closing development and climate funding gaps

With a USD 4 trillion annual funding gap jeopardizing the achievement of the SDGs, strengthening the lending capacity of the international development finance system is essential. In response to these gaps, governments at the FfD4 called on MDBs to triple lending, while maintaining financing sustainability. However, MDBs currently have limited means of securing additional capital to meet this goal, and some experts argue that further stretching their balance sheets without new capital would entail considerable financial risk. General capital increases are considered the safest and most effective way to expand MDB lending, but have become politically difficult to secure. Because shareholders must both authorize and fund these “paid-in” increases, they face the dual challenge of winning taxpayer support and managing shifts in voting power toward emerging economies.

Attention has thus shifted toward hybrid mechanisms that could strengthen MDB balance sheets without relying solely on traditional donor contributions. Following a proposal from the AfDB and IDB, the IMF authorized high-income countries to on-lend their unused SDRs to MDBs, allowing them to be used as hybrid capital. The impact of this approach, however, may be modest, as SDR use for hybrid capital is capped at SDR 15 billion (USD 21.5 billion) to limit liquidity risks, and as of 2024, no SDRs have been deployed for this purpose. The issuance of hybrid bonds such as those deployed by the AfDB represent another option. In 2024, the AfDB issued a first-of-its-kind USD 750 million sustainable bond to private investors in order to raise hybrid capital for exclusive use in environmental and social projects. The bond was oversubscribed eightfold, attracting USD 6 billion in demand. These emerging approaches could help to bolster MDB capital bases without altering voting power or placing demands on taxpayers.

Mobilizing private investment is also essential to meeting climate and development funding needs. In 2023, roughly USD 470 trillion in global financial assets were privately held; redirecting even 1 percent of these assets would close the current financing gap. Accordingly, the World Bank’s “Billions to Trillions” agenda and its recent Evolution Roadmap aim to leverage billions in public resources and official development assistance to attract trillions in private capital. Despite the perceived promise of this approach, private creditors have extracted USD 141 billion more in debt repayment from developing countries than they have lent since 2022. On average, one dollar of public investment from MDBs and bilateral development finance institutions mobilized just USD 0.37 in low-income countries compared to USD 1.06 in lower-middle-income countries. Rather than channeling resources to the riskiest markets where financing is most needed, MDBs’ internal incentives to protect credit ratings and prioritize own-account lending often lead them to compete with, rather than crowd in, private capital, leaving higher-need environments underserved. To reverse this trend, organizations such as ODI recommend that MDBs deploy more catalytic instruments, such as guarantees, first-loss tranches, political risk insurance, and local currency facilities, that genuinely reduce risk for private investors in higher-need markets rather than subsidizing returns in relatively safe ones.

Looking ahead: Forging a path to equitable and effective financial governance

Although BWIs remain critical development finance and global governance stakeholders, piecemeal attempts to date to change their structure and operations have not made these institutions fit for purpose. In an interview with FP Analytics, Luiz Vieira, coordinator of the Bretton Woods Project, emphasized the normative and political power of the IFIs, which go well beyond their lending activities, even at a time when their credibility and trustworthiness is challenged. Other interviewees emphasized the need for collaborative and complementary action by a range of stakeholders to address the challenges facing the international financial architecture and make it truly responsive to the needs of the communities it serves. As Margaux Day, executive director of Accountability Counsel, shared, “It does take a wide spectrum to move such a vast ecosystem towards truly protecting people and planet.” Effective global economic governance will not only require responding to shifts in geopolitical and economic power, supporting the continued growth of emerging markets, and renewing investment in global public goods and cross-border challenges, but also accountability to potential negative impacts.

Changing the development finance paradigm from one of benevolence and charity to one of equity and justice will require significant adjustments to the governance and operations of IFIs. Building on the solutions outlined above and in earlier installments of this project, the following recommendations can catalyze immediate action on debt, aid, and IFI reform:

• Prioritize the voices of developing and emerging economies in the governance, policymaking, and norm-setting of IFIs. This will include adjusting decision-making and governance frameworks to be more equitable and undoing longstanding power dynamics that privilege the views and priorities of creditor countries.
• Promote policies, lending practices, and financing approaches that create fiscal space within borrower countries and support sustainable, long-term domestic resource mobilization. This entails eliminating surcharges and high interest payments on debts, implementing climate-sensitive debt sustainability analyses and risk assessments, and increasing the availability of concessional financing.
• Meet the goals of the World Bank Evolution Roadmap, and strategies of other MDBs, by facilitating and committing to the shared financing of global public goods such as climate mitigation and adaptation, environmental and biodiversity conservation, pandemic preparedness, and health security, as a means of promoting a shared and cooperative approach to global security and governance.
• Build multistakeholder coalitions invested in the creation of an equitable, effective international financial architecture and undertake complementary and collaborative work to that end. These coalitions will include actors from all sectors, including academia, civil society, national and local government, grassroots and non-governmental organizations, and the IFIs themselves, bringing together skills, knowledge, and lived experience to identify plausible and feasible solutions to global challenges.

As these recommendations make clear, the work of reforming IFIs will not be straightforward. A truly multistakeholder effort is necessary to reimagine global governance, identify constructive reforms, and transform the international financial architecture.

By Isabel Schmidt (Senior Policy Analyst and Research Manager), Miranda Wilson (Senior Policy and Research Analyst), Jack Ronan (Policy Analyst), and Dr. Mayesha Alam (Senior Vice President of Research).

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