Participants
NGOs: Peter Chowla, BWP; Jasmine Burnley, ActionAid; Jeff Oatham, OWT; Claire Wren, OWT; David Woodward, nef; Rick Rowden, ActionAid USA
HMT: Paul Griffiths, Natalie Toms, Richard Perrin (all GPI)
Discussion
David Woodward led off with a discussion of the democratic deficit and what kind of steps need to be taken for democratic reform. HMT agrees that change is needed but disagreed on the exact proposals for doing so. The Fund needs to represent its members and maintain the interest of growing members. HMT is focused on the current round of reforms (not looking at the big picture now). The goals are to ensure and increase in basic votes and get the formula factors right. HMT set out that increasing the basic vote is one way that democratic problems should be addressed, not the quota formula. There is no call for a democratic focus from Fund members. Treasury supports lifting basic votes to 11% of the total.
The negotiations are complex and difficult. HMT is supporting the idea of compression formulas to shrink the disparity in voting weight between the top and the bottom. Peter asked how to get the objectives of HMT (increased votes for LICs and developing countries as groups) at the same time as using the proposed quota formula factors of GDP at market rates and PPP. The EU is pushing for a “principles-based formula”, based on the purposes of the Fund and the purposes of quota. This points to economic weighting only and to GDP being weighted only on market exchange rates, not PPP. HMT set out that the formula in and of itself has to be credible.
The process is to get a formula first then get support for the package then set the basic votes increase. The problem is that GDP at PPP hurts low-income countries. Responding to the charge that the British are blocking reforms – the UK would probably remain above the French in any new formula, so there is no way to say that the UK is the one opposing reforms
Jeff and Claire then started the discussion on double majorities, explaining the idea and how it could help. HMT indicated that “it is something we are open to”, “it is the sort of solution that might help”, but it is not something to consider in this round of negotiations, it is not a short-term option. On a discussion of the problems to be foreseen with a double majority, the potential for gridlock was highlighted – it may prevent active decisions being made and some analysis of the correct thresholds would need to be made. There was discussion of the point and explanation of how DM would not block decisions too much.
We also briefly discussed other things in IMF governance – transparency, leadership selection etc. Including an important distinction between transparency for policy formation and transparency of country documents. HMT set out that double majorities are only one option among many on the table. HMT expects that it would take a position on increased transparency at the board and board transparency should be discussed during the disclosure policy review next year.
David explained that there is a problem of incentives – that EDs have different incentives even than their own finance ministries. HMT explained that they have always supported transparency and that the UK can’t be the one promoting domestic accountability in other countries. This is a hard dilemma, but a long-term one, HMT is focused on the quota formula right now. Also highlighted was that a different governance structure would create different problems – nothing is perfect
A debate ensued about HMT strategy and their shooting for short-term targets versus long-term goals. Peter and Rick emphasised that the current strategy will probably NOT produce an outcome that improves the IMF’s legitimacy or effectiveness, and certainly not within a few years. The question is why to waste all the political capital and energy pushing for reform on a package that doesn’t work. HMT recognized that in 5 years’ time maybe there won’t be overwhelming changes, but felt that it was important to make small steps in the right direction.
