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IFI governance

Background

IMF governance – CSO meeting with the IMF managing director

Istanbul, 1 October 2009

8 October 2009

Speakers

Dominique Strauss-Kahn, IMF managing director
John Lipsky, IMF deputy managing director
Jo-Marie Griesgraber, New Rules for Global Finance (chair)
Peter Chowla, Bretton Woods Project, UK
Caroline Pearce, Oxfam International, US/Senegal
Chilufya Chileshe, Jesuit Center for Theological Reflection, Zambia

Initial discussion

Dominique Strauss-Kahn – recognises that previous moves only go so far, need further progress, moving in the right direction, believes CSO input is important

Peter Chowla – we should have a real double majority based on countries not chairs and for all decisions; the new quota formula is not good enough, it still needs correction, including use of democratic elements; quota should not be rigidly linked to finance access; we need to do something about US veto

DSK response

  • I agree on double majority and we already act that way at the board
  • quota is a difficult reform and we need compromise but recognise that we can’t implement quota formula blindly, it will have to be adjusted
  • I agree on the need to somehow represent citizens, we just don’t know how
  • on delinking quota from access – it happens in practice, countries get extraordinary access when they need it
  • on veto – I agree on principle but have had opposition from everyone! US is against, even emerging markets are against lowering the threshold because they wont be able to veto as a group

Caroline Pearce – need to rebalance the board away from Europe, we want all elected and no appointed constituencies, and want accountability of EDs to constituencies and stakeholders.

DSK response

  • I agree on appointed seats and I believe this will dissappear in time, it is a legacy of the past
  • hard on accountability – EDs jealously guard their independence, CSOs must talk to them directly, because as management we can not approach them on this issue
  • On representation for Europe – it is a quota based institution, based on economic size. Even in perfect world, without a eurozone chair you would still need 5 seats for Europe; don’t think the eurozone will sit in 1 chair anytime soon
  • There is a risk that developing countries might get more chairs but have less voice because they will have miniscule percentage of the votes in the new chairs if you divide Africa up into 3 or 4 constituencies.

Chilufya Chilesha – the IMF fails to be accountable on its policies to citizens, we need external independent assessment, humanisation of the IMF, and understanding of the development context

DSK response

  • This is a very outdated view of the Fund – we have social conditions, social spending floors, we let countries spend more, we have vetoed certain social spending cuts that we thought were too harmful in Eastern Europe
  • It is countries with problems that come to the Fund, we have to fix the problems, there may be costs
  • We are lending more than ever to help these countries and we do it 0 per cent interest
  • We also have the Independent Evaluation Office (IEO), and they make a lot of trouble for us, so we think the assessment is happening; we are doing follow-up on all IEo recommendations

Open discussion

Peter Bakvis, ITUC – the IMF delaas only with finance ministries and this stops accountability; there needs to be greater relations with other ministeries, parliaments, etc; we need operational policies on engaging stakehodlers and transparency in negotiations

Nancy Alexander, Heinrich Boell – we need hard numbers about the fiscal felexibility in countries, calling for labour flexibility in programmes is out of order; the IMF doesn’t just ‘fix’ problems, the IMF helped create the problems

Max Lawson, Oxfam GB – what is your thinking on the new study to be done by the IMF on the Tobin tax?

Soren Ambrose, ActionAid International – you are talking about doing a double majority based on chairs rather than countries, it should be on countries, meaning the Africa ED will have the highest number of votes

DSK response

  • we are improving contact with stakeholders, we prevented an anti-union law in Serbia
  • ultimately though our partners are the authorities, we dont have a choice – if you want broader engagement talk to the governments
  • on gold sales – it will be difficult to get more money out of this
  • we are also working to try to stop ODA cuts by donors
  • On the Tobin tax – a simple Tobin tax will not work anymore, we are going to work on this paper, we will need to explore more elaborate plans
  • on double majority – there are two possible understandings – but EDs can’t practically go back and get approval on each decision from capital in order to cast votes based on countries
  • We haven’t even approved the last quota reform yet – only 34 countries approved it but we need 111 countries. It is a priority for capital in small and developing countries. No African country approved it yet