Bretton Woods institutions urged to shift focus amid $36 trillion debt

United States Treasury Secretary Scott Bessent called for Bretton Woods institutions, including the International Monetary Fund (IMF) and World Bank, to reorient their missions during a speech at the Institute of International Finance on April 23.

Bessent emphasised the need for these institutions to address global trade imbalances and protect fiat currencies from exchange rate risks.

“The Bretton Woods institutions must step back from their sprawling and unfocused agendas,” he stated.

“The IMF’s mission is to promote international monetary cooperation, facilitate the balanced growth of international trade, encourage economic growth, and discourage harmful policies like competitive exchange rate depreciation,” he added.

Bessent’s remarks come amid a decline of the US dollar to three-year lows and the United States’ $36 trillion government debt.

The call to correct trade imbalances, particularly between the US and China, coincides with growing economic competition between the two countries.

The Bretton Woods Agreement, signed in 1944, originally pegged currencies of 44 countries to the US dollar, which was linked to gold at $35 per ounce.

This system aimed to reduce foreign exchange risks and facilitate global trade.

However, in 1971, President Richard Nixon ended the dollar’s convertibility to gold, effectively ending the Bretton Woods system.

Since then, the IMF and World Bank have worked to manage the effects of floating fiat currencies.

Bessent also highlighted stablecoins as a tool to support the US dollar’s status as the global reserve currency.

He said stablecoins could increase international demand for US dollars and government debt instruments.

Bitcoin (CRYPTO:BTC) advocates, however, argue that gold-backed stablecoins or Bitcoin itself could challenge the dollar’s dominance.

Investor Ray Dalio has suggested a global macroeconomic shift may eventually replace the US dollar as the reserve currency, possibly with a digital alternative.