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IFI governance

Background

Decision-making at the IMF

12 September 2005

IMF staff and management are accountable to the IMF’s managing director, currently Rodrigo de Rato, who is appointed by and accountable to the executive board. By ‘gentleman’s agreement’, the managing director is chosen by the IMF’s European members, whilst the first deputy managing director, currently Anne Krueger, by the US government.

Board of governors

The IMF’s supreme decision-making body, consisting of one governor and one alternate governor from each of the IMF’s 184 member countries. The governor is appointed by the member country and is usually the minister of finance or the governor of the central bank. In practice the board of governors delegates day-to-day oversight to the executive board but retains responsibility for major decisions concerning the institution itself, such as changes to the Fund’s structure, and accepting new members. The board of governors normally meets twice a year at the IMF-World Bank spring and annual meetings.

International monetary and financial committee

A committee of the board of governors. Membership is based on the same constituency system as the executive board (see below), and is made up of 24 members from the board of governors. The IMFC normally meets twice a year, to set the agenda for the spring and annual meetings of the IMF. Other responsibilities of the committee include providing guidance to the executive board, supported by the IMF’s professional staff.

Executive board

Carries out the day-to-day work of the IMF at its headquarters in Washington, D.C. It is chaired by the managing director of the IMF, who is assisted by three deputy managing directors. The board consists of 24 executive directors (EDs), who are appointed or elected by member countries or by groups of countries (see below). Some EDs are elected on a bi-annual basis and others are chosen amongst their constituents. The board usually meets for three days per week. In 2003 it spent 55 per cent of its time on country member matters e.g article IV consultations and reviews and approvals of IMF financing arrangements; and 19 per cent of its time on global and regional surveillance and general policy issues, including the world economic outlook, strengthening the international financial system, the debt situation, and issues related to IMF lending facilities and programme design).

At the board level most countries are grouped into constituencies, with the exception of the five largest shareholders of the IMF- US, Japan, Germany, France and the UK who have one chair each. Russia, Saudi Arabia and China are currently single country constituencies. In some constituencies the appointment of the executive director (ED) is rotated amongst the country members and in others the country with the largest number of votes appoints the ED.

Presently, member votes and representation are skewed in favour of creditor nations. Any new formula for calculating voting weights can only be considered during periodic reviews of the ‘quotas’ assigned to each country. According to the Fund’s articles of agreement general quota reviews happen every five years. The twelth and latest such general review was concluded at the end of January 2003 with no proposal to increase quotas.

Ten of the available 24 board seats are currently occupied by developing countries, who collectively hold 26 per cent of the voting share. The number of developing country board seats rises to eleven when the constituency currently headed by Spain is chaired by Mexico or Venezuela. Eight constituencies contain both debtor and creditor members, in seven of which the majority of voting power resides with creditors. For developing countries to be able to carry a decision in their favour they must build alliances with creditor members. There are currently 45 Sub-Saharan African member countries in the IMF, who hold a combined voting share of 4.4 per cent.

Decision-making at the board

The board makes decisions by consensus. Optimally this comprises a unanimous decision by all EDs. However, often there are important differences of view among the membership, for example between debtor and creditor interest. The IMF’s rules and regulations prescribe that “the chair shall ordinarily ascertain the sense of the meeting, in lieu of a formal vote”, effectively seeking to obtain the broadest spectrum of support in terms of numbers of EDs and voting share, provided that if put to a vote there would be the needed majority (depending on the decision being made, a majority of 51%, 66% or 85% is required). The chair urges the board to consider matters at least until a broad majority has emerged on the issue under discussion. Where no consensus can be reached a simple majority of the voting power can quickly be achieved by a collective agreement among the G-7 chairs and a few other directors.

EDs representing more than one country can not split their votes, or cast separate votes for each of the members they represent and must cast a single block vote for each of the member countries that they represent. Differing views of the members can however be noted in writing. EDs rarely object- abstention is the strongest form of protest.

Since 1999 the introduction of chairman’s summaries and public information notices summarising board discussions on country programmes, surveillance report and broad policy issue papers have been made public. Board minutes- which record all interventions by Executive Directors, management and staff- are released to the public after 10 years.

Standing committees

These include: Committee on administrative policies; Committee on the budget; Committee on liaison with the World Trade Organisation; and Committee on the annual report. The IMF does not make available information on the members, workplan or meeting minutes of the standing committees. With a few exceptions they are not decision making bodies, but rather serve in an advisory capacity and prepare decisions to be taken by the executive board. Most committees have a membership of eight and their attendance is open to the whole board.