Reforming The Imf For The 21st Century

Reforming the IMF for the 21st Century

A Strategy For IMF Reform

The International Monetary Fund (IMF) is in eclipse as the preeminent institution promoting international economic and financial stability. Successful reform of the IMF must engage the full spectrum of its members. The IMF should not focus primarily on its low-income members and the challenges of global poverty nor should it focus exclusively on international financial crises affecting a small group of vulnerable emerging-market economies. Instead, it must be engaged with each of its members potentially on the full range of their economic and financial policies and play a central role in shaping global economic performance. This important new book strongly argues that systemically important countries, starting with the Group of Seven, must support the IMF in this role. Its recommendations cover all key aspects of IMF responsibilities and operations: (1) In the crucial area of governance, the membership of the IMF should promptly address the reallocation of IMF shares (voting power) and the reallocation of chairs (representation on the IMF executive board), and it is time to discard the old conventions and to adopt a merit-based approach to the choice of the IMF's leadership; (2) mechanisms should be put in place to increase the IMF's leverage over systemically important members, and the IMF must act more forcefully in discharging its responsibility to exercise firm surveillance over members' exchange rate policies; (3) the Fund's central role in external financial crises should be reaffirmed; (4) the IMF should narrow and refocus its involvement with its low-income members; (5) the IMF's activities should be updated with respect to members' capital account policies and financial sectors; and (6) the IMF should put in place procedures for borrowing from the market to guard against the possibility that it will not receive timely increases in its quota resources.

IMF Governance-Summary of Issues and Reform Options

This paper summarizes the main governance challenges and reform options facing the IMF, drawing together the analysis and reform proposals in the reports of the Eminent Persons Group (headed by Trevor Manuel), the IEO, and a range of other recent work on Fund governance. Lest the wide scope of these inputs result in a laundry list, judgment has been exercised in selecting key issues and proposals, and in laying out some of the pros and cons. With reform of quotas/voting power on a separate track, the focus here is on the institutional framework through which members express voting power, weaknesses in which are seen by many to have eroded the Fund’s legitimacy and effectiveness, thereby displacing the debate and initiative to outside entities. While an overall reform package would have to include quota shares, the key proposals discussed here aim to: increase political engagement and oversight; enhance Executive Board effectiveness and representation; modify voting rules; better delineate responsibilities; open up management selection; and tackle problems with mandate and institutional culture that limit the issues and approaches taken. Civil society has expressed a range of concerns related to IMF governance, including with regard to accountability at all levels (IMFC, Executive Board, management, and staff), mechanisms for responding to complaints and feedback from the broader public, and transparency. Given the diversity of their interests, and to provide unfiltered access to CSO views, the supplement: Fourth Pillar Recommendations from Civil Society; Preliminary Summary of Principles, Issues and Recommendations; has been prepared by CSO groups.