Write a note on the major failures of Bretton Woods Institutions.

Write a note on the major failures of Bretton Woods Institutions. 

Ans. Bretton Woods institutions failed on following grounds: 

(a) Statistics are showing that average public debt burdens in the emerging world have risen to about 70 per cent of GDP. 

(b) The challenge of managing debt burden of the size is magnified because the debt structures in a number of countries are still quite vulnerable to foreign currency, liquidity and Interest rate risk. 

(c) Major challenges are in the fiscal and public debt area where a number of emerging market economies across different regions face very high, and in some cases still growing public sector debt levels. 

(d) A better fiscal effort is required to keep the debt stock on a stable or declining. It is increasing vulnerability of financial crisis in an economy. 

(e) In some economies fiscal policy is too weak to handle financial crisis in others it is strong enough to stabilize the debt mechanism but has not provided for unexpected shocks. 

(f) Banking sector has become exposed to foreign competition which has led to increased share of non residents in their accounts. 

(g) The external position as it is today is not reliable for long term. In some cases, it may reintroduce a greater external risk. 

(h) Financial exposure of Bretton Woods’s institutions is already very high.