Rt Hon George Osborne MP
Chancellor of the Exchequer
1 Horse Guards Road
London SW1A 2HQ
9 September 2010
IMF quota reform
We are writing to raise our concerns about the limited nature of the quota reform of the International Monetary Fund (IMF) currently under discussion, and to urge you to push for more meaningful changes to IMF governance.
As non-governmental organisations that have long campaigned for reform of IMF governance, we were pleased to see your government’s commitment in the coalition agreement to support reform of the IMF “in order to increase the involvement of developing nations.” However, we are concerned that proposals currently being discussed on quota and voting reform and board selection will make only limited, if any, progress towards this goal.
As you know, ensuring that developing countries have a greater say in the running of the IMF – appropriate as these countries continue to represent the IMF’s major client base, and necessary to create a more effective institution – will require significant change to voting shares. The current commitment to a 5 per cent shift will not achieve this. Further, a 2008 commitment made by the IMF’s board of governors to not undertake further quota reallocation without a full reform of the quota formula is in danger of being reneged upon. We urge you lend your support to efforts to ensure a full reform of the quota during this round of reform.
Indeed, quota reform is a divisive, zero-sum game that has prompted countries to look only after their national interest rather than the global public good. We believe that the best way to increase the voice of developing countries would be to implement a double majority voting system that matches quota-based votes to voting based on membership in the institution. We would welcome your support for this necessary reform.
Finally, as you know, IMF governance is larger than the changes to the quota, and should be implemented as a package of reform. Of utmost importance is representation on the Executive Board and a plan for reducing the number of chairs held by European countries. Any proposals to reduce the size of the board should not be at the expense of developing country chairs. The IMF also needs more transparency in its decision making and policy processes. Commitments to a fair, transparent and merit-based selection process for all senior management positions also need to be implemented. Changes to voting majorities that prevent single countries from holding an effective veto over important decisions should also be made.
We urge you to put your weight behind root and branch reform of the structure and roles of the IMF so that poor countries – whose citizens are the most heavily influenced by the institution – can see their interests reflected in them. We enclose a short paper that sets out our proposals in more detail. We would welcome the opportunity to discuss these issues in more detail with you in the run up to the IMF’s annual meetings and the G20 summit in Seoul.
Richard Miller, Chief Executive, ActionAid UK
Jesse Griffiths, Coordinator, Bretton Woods Project
Nick Roseveare, Chief Executive, Bond
Chris Bain, Director, CAFOD
Loretta Minghella, Director, Christian Aid
Justin Forsyth, Chief Executive, Save the Children
John Christensen, International Coordinator, Tax Justice Network
Gideon Rabinowitz, Coordinator, UK Aid Network
Deborah Doane, Director, World Development Movement