IMF Governance Reform and the Board’s Effectiveness
DOI | http://doi.org/10.1111/j.1758-5899.2011.00112.x |
Published date | 01 May 2012 |
Date | 01 May 2012 |
IMF Governance Reform and the
Board’s Effectiveness
Michael DaCosta
Economics Consultant
Chief, IMF Board Operations Division, 2002–08
Modernizing the IMF’s governance is a core ele-
ment of our effort to improve the IMF’s credibil-
ity, legitimacy, and effectiveness. …As part of
the IMF’s quota review, to be completed by
January 2011, …we agree that a number of
other critical issues will need to be addressed,
including …ways of enhancing the board’s
effectiveness.
1
Agreement on the need for a more representative and
effective International Monetary Fund (IMF) positioned at
the center of efforts to stabilize the global economy was
a highlight of the G20 summit in Pittsburgh in Septem-
ber 2009. This was followed in December 2010 by what
the IMF’s managing director referred to as ‘landmark’
reforms, including agreements by the IMF’s member
countries to increase the voting power of emerging mar-
ket and developing countries by 5.3 percentage points
(this includes the impact of the ad hoc quota adjust-
ments agreed in 2008) and to reduce the board repre-
sentation of the advanced European countries by two
chairs, while preserving the size of the board at 24
chairs. The changes require ratification by the IMF’s
member governments, and this process could be com-
pleted by late 2012. Despite the changes the US will
continue to retain veto power over those major deci-
sions in the IMF that require a supermajority of 85 per
cent, including those related to quotas, Special Drawing
Rights (SDR) allocations and the admission of new
members.
The fanfare given to the relatively modest planned
changes in the structure and composition of the board
and in the voting power of emerging and developing
countries contrasts with the relatively sparse attention to
the other governance priority identified by the G20:
enhancing the effectiveness of the IMF’s executive board.
With the considerable authority delegated by member
countries to the board, including responsibility for over-
sight of the IMF’s policies and operations, better IMF
governance will require not only a more representative
board, but also a more effective one.
The basis for the concerns about the board’s effective-
ness was captured in two reports in 2008–09: the
May 2008 evaluation of IMF governance by the institu-
tion’s Independent Evaluation Office (IEO), and a
March 2009 report of the Committee on IMF Governance
Reform, chaired by Trevor Manuel.
2
Both reports reach
troubling conclusions, including that the board provides
little meaningful oversight and inadequate strategic
advice, and that it has not been effective in monitoring
policy implementation. This is due, in part, to its immer-
sion in the details of the institution’s day-to-day opera-
tions. The reports called for urgent reform, and in a
November 2010 statement on the board’s work program,
the managing director reported that a working group of
directors had paved the way for important changes,
including better prioritization of meetings and a reduc-
tion in the frequency of meetings.
3
This commentary contributes to the discussion on the
board’s efficiency by examining more closely the outputs
from two of its principal activities: meetings and deci-
sions. The rationale for focusing on these variables is
that the ‘business of the Fund’ takes place in board
meetings and is reflected in board decisions, so scrutiny
of the outputs from meetings and decisions provides
insights into the institution’s governance.
4
To capture
these outputs, IMF data on board meetings and deci-
sions for 2007–08, the period of the outbreak of the
global financial crisis, were reviewed. The data comprise
information on the topics discussed, the length of meet-
ings and the nature of the decisions that were approved.
The data show an active board, which was convened
for meetings on about 360 topics a year lasting a total
of about 400 hours.
5
About 60 per cent of the meetings
were related to country matters, including the annual
surveillance exercise with member countries and loan
approvals. Meetings on non-country matters took up
about one-third of the total while board committee ses-
sions accounted for the remainder. In addition, the
board approved approximately 300 decisions. Further
examination of the details underpinning these totals
shows how the board is enmeshed in the details of the
Global Policy Volume 3 . Issue 2 . May 2012
ª2012 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2012) 3:2 doi: 10.1111/j.1758-5899.2011.00112.x
Practitioner Commentary
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