IFI governance

Background

IMF and World Bank decision-making and governance

7 April 2020 | Inside the institutions

IMF Board of Governors, Bali, Indonesia, 2018

IMF Board of Governors, Bali, Indonesia, 2018. Photo: IMF.

Decision-making at the IMF

The board of governors is the IMF’s highest decision-making body, and consists of one governor and one alternate governor from each member country, normally the minister of finance or head of the central bank. Although the board of governors has delegated much of its decision-making power to the board of executive directors, it retains significant authority, including the approval of quota reforms and amendments to the Articles of Agreement. The board of governors is advised by the International Monetary and Financial Committee (IMFC), the direction-setting body of finance ministers for the IMF, and the Development Committee (see below). The Development Committee is a joint committee of the board of governors of the IMF and World Bank, which is meant to advise the Bank and the IMF on critical development issues and the resources needed to promote economic development.

The IMF executive board, which is responsible for daily operations, is chaired by the IMF’s managing director and consists of 24 executive directors (EDs) representing member countries through constituencies. ED constituencies are divided according to quotas (see below), with some member countries representing only themselves (this is the case for China, France, Germany, Japan, Russia, Saudi-Arabia, the UK and the US), while other EDs represent a block of countries, or constituency. sub-Saharan Africa, for example, has two EDs representing 46 countries.

Although board discussions are generally not published and thus the positions of individual board members not disclosed, decision-making on the executive board is typically made through consensus with voting kept to a minimum. Votes on substantive issues need 85 per cent approval, granting the US (with its 16.52 per cent vote share) effective veto power over any major decisions.

The quota system

The IMF describes itself as a “quota-based institution”, meaning each of its members is assigned a quota when they join, which determines three specific things: 1) the amount of financing it provides to the IMF; 2) the amount it can borrow from the IMF, although exceptions can be made; and 3) its voting power on the board. This has often been referred to as a ‘one-dollar, one-vote system’.

The assignment of quotas is determined by a specific quota formula, broadly based on a country’s relative position in the global economy. The current formula consists of four elements: GDP (50 per cent), ‘openness’ (30 per cent), economic variability (15 per cent) and international reserves (5 per cent). Quotas are denominated in Special Drawing Rights (SDR), the IMF’s international reserve asset. The value of the SDR is based on a basket of five currencies — the U.S. dollar, the euro, the Chinese renminbi — from 2016, the Japanese yen, and the British pound sterling (see Observer Winter 2016). Historically, civil society has demanded a number of reforms in relation to IMF and World Bank vote shares, including the introduction of double majority voting, where major decisions require both shareholder and member state majorities, thus giving developing countries a larger part in decision-making (see At Issue, Double majority decision making at the IMF Implementing effective board voting reform).

The IMF is required by its Articles of Agreement to review its quotas every five years, so that the distribution of vote shares is adjusted to the evolving economic weight of the member states. Quota reviews address two main issues: 1) the size of an overall increase in quotas, meaning the size of the IMF’s financial lending power; and 2) the distribution of the increase among members.

In February 2020, the 15th IMF quota review was officially abandoned, after the US “failed to see the need for a quota increase” that would have likely redistributed vote shares in favour of China. Instead, it opted to increase financing to the Fund’s New Arrangements to Borrow, designed as a backstop to the Fund’s quota-based financing mechanism, undermining the notion the IMF is a quota-based institution (see Observer Summer 2019).

World Bank shareholding

Each of the four financial entities that make up the World Bank Group — the International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) — has its own shareholding structure.

As is the case of the Fund, the board of governors is the highest decision-making body of the World Bank and consists of one governor and one alternate governor appointed by each member country. If the country is a member of the Bank and is also a member of the IFC or IDA, then the appointed governor and his or her alternate serve ex-officio as the governor and alternate on the IFC and IDA boards of governors. MIGA governors and alternates are appointed separately. Like the IMF, the board of governors has delegated most day-to-day decision-making to the four separate boards of executive directors that govern the four financial entities of the World Bank Group. The current boards of the World Bank Group consist of 25 executive directors.

Similarly to the IMF, member countries are allocated votes at the time of membership and subsequently for additional subscriptions of capital. While votes are allocated differently in each organisation, the five largest shareholders across the World Bank Group are the US, Japan, Germany, France and China. Seven of the 25 ED constituencies are made up of one member (the five biggest shareholders, as well as the UK and Saudi Arabia), whereas Sub-Saharan Africa is divided into three constituencies, and many Asian constituencies are crowded, for example, in comparison to European counterparts.

In 2010, Governors agreed a set of reforms meant to enhance the voice and participation of Developing and Transition Countries (DTC) in the World Bank Group, notably through an increase in voting power, and realigned shareholding in line with economic weight and development contributions. In 2018, a General Capital Increase was agreed for IBRD and IFC, resulting in the continued dominance of high-income countries over both institutions and the US and EU member states retaining an effective veto over major decisions at the IBRD. The replenishment of IDA in 2019 has maintained the US, Japan and the UK as the largest shareholders respectively.

While some of these reforms have resulted in improved representation for China, civil society calls have long been made for a reallocation of board seats and votes to ensure that all member countries are fairly able to represent themselves and that creditor and borrower countries have an equal allocation of voting shares. Proposals have also been made for having no more than ten countries per ED constituency, and for a rotation of board members among different countries in any given constituency (see Observer Winter 2018, Update 33).

A shareholding review for the World Bank Group is planned to take place in 2020.

Investment Dispute Settlement

The International Centre for Settlement of Investments Disputes (ICSID) provides facilities for conciliation and arbitration of international investment disputes. It is governed by the ICSID Administrative Council, which is made up of one representative of each of its 162 members states. Each member state has one vote on the Administrative Council and there is no weighted voting on any matter. Its main functions include passing rules of procedure for ICSID cases, adopting administrative and financial regulations for the Centre, and electing the ICSID Secretary-General. It plays no role in the administration of individual cases.

The president of the World Bank Group, David Malpass, is the chairman of the Administrative Council. Functions of this role include designating ten individuals to each of the ICSID Panels of Arbitrators and of Conciliators, constituting conciliation commissions and arbitral tribunals in certain circumstances, appointing ad hoc committees for annulment proceedings, and deciding proposals to disqualify a sole arbitrator, a majority of a tribunal, or a single member of a tribunal or commission.

Civil society has consistently raised concerns about significant bias within ICSID in favour of corporations and commercial interests (see Observer Autumn 2015, Bulletin 2013).

The gentleman’s agreement

The historic World Bank and IMF ‘gentleman’s agreement’ has ensured that the IMF managing director is always a European and the World Bank president a US national. While this is not prescribed in the Articles of Agreement of either institution, it dates back to the creation of the institutions in 1944, when membership of the IMF and World Bank was limited to 45 and 38 states, respectively, and European powers still retained colonies (see Inside the Institutions, What is the gentleman’s agreement?).

Civil society has long pointed out that the Fund and Bank continue to undermine their legitimacy by adhering to the gentlemen’s agreement, calling for a transparent, merit-based process (see IMFboss.com, WorldBankpresident.org). Nevertheless, leadership changes in 2019 at both the Bank and Fund saw the gentleman’s agreement maintained (see Observer Spring 2019, Autumn 2019).

More background on this issue

IFI governance

Background

7 April 2020 | Inside the institutions

IMF and World Bank decision-making and governance

This Inside the Institutions looks at decision-making and governance structures at the IMF and World Bank.

IFI governance

Background

31 March 2016 | Inside the institutions

IMF & World Bank decision-making and governance (archive)

This Inside the Institutions examines the recent and ongoing reforms at the IMF and World Bank, and places them in context of existing structures and processes.

Infrastructure

Background

16 September 2013 | Minutes

Civil society meeting with Stewart James, UK Alternate Executive Director to the World Bank

Minutes of CSO meeting with Stewart James, UK Alternate Executive Director to the World Bank, 15 July 2013

IFI governance

Background

26 June 2013 | Resource

Leaked documents: World Bank strategy draft recommendations

Web links for the leaked documents about the World Bank's strategy.

IFI governance

Background

30 May 2013 | Minutes

Civil society meeting with Steve Field, UK IMF Executive Director

Minutes of CSO meeting with Steve Field UK IMF Executive Director, 9 April 2013

IFI governance

Background

24 April 2013 | Minutes

IMF reform in developing country perspective

Notes from IMF 2013 Spring meetings civil society forum event

Infrastructure

Background

23 April 2013 | Minutes

Colombia case study: results measurement and poverty eradication

This session examined Colombia's private sector partnerships and poverty eradication programme.

IFI governance

Background

23 April 2013 | Minutes

The private sector and poverty eradication

This session gave an overview on the links between private sector and healthcare provision in tackling poverty.

IFI governance

Background

22 April 2013 | Minutes

Bending the arc of poverty

The session focused on the World Bank's development strategy, poverty eradication goals, global inequality, and the threat of climate change.

IFI governance

Background

22 April 2013 | Minutes

Financial and housing crises, the Bank's safeguards and the right to adequate housing

This session featured a presentation from UN special rapporteur on the links between financial and housing crises, safeguards and the right to adequate housing.

IFI governance

Background

22 April 2013 | Minutes

The challenges of advancing sustainability at the World Bank

This panel discussion reflected on the major sustainability challenges facing the World Bank through exploring two World Resources Institute areas - a portfolio analysis on 2012 projects, and the interaction between country systems and World Bank safeguard approaches.

IFI governance

Background

22 April 2013 | Minutes

From the Arab revolutions to global austerity trends

This session examined issues thrown up by the Arab revolutions, including the fiscal, monetary, tax and investment policies being considered by governments facilitating, or hindering countries in the Arab and other regions in building an inclusive economy and supporting socioeconomic recovery, the impact on public expenditure for the strengthening of education, health, and other social sectors as well as the management of chronic and high unemployment and high food and fuel prices.

IFI governance

Background

19 April 2013 | Minutes

World Bank executive directors roundtable with CSOs

Minutes of an open roundtable with EDs that occurred during the 2013 spring meetings.

IFI governance

Background

8 April 2013 | Inside the institutions

World Bank staff incentives

The World Bank Group's staff incentives and compensation schemes are considered important drivers of the Bank institution's successes and failures.

IFI governance

Background

13 February 2013 | Inside the institutions

World Bank Group's sub-national lending

The World Bank and the International Finance Corporation (IFC, the Bank's private sector arm) are jointly encouraging sub-national lending to states or provinces, aimed at boosting direct engagement at the state or municipal level.

IFI governance

Background

6 December 2012 | Inside the institutions

World Bank corporate scorecard

Every six months the World Bank issues a corporate scorecard, which is submitted each Autumn to the Bank's annual meetings. The scorecard is supposed to "provide a snapshot of the Bank's overall performance, including its business modernisation, in the context of development results." It is compiled by Bank staff to "facilitat[e] strategic dialogue between management and the board on progress made and areas that need attention."

IFI governance

Background

3 October 2012 | Inside the institutions

World Bank lending facilities

The World Bank's investment lending (ILs) have been joined in recent years by new lending instruments, whilst IL itself faces an overhaul, as the Bank's operational policies come under review and pilots for the use of 'country systems' mature. The Bank is presently using four lending instruments: investment lending, development policy lending (DPL), Program-for-Results, and the World Bank guarantee program.

IFI governance

Background

3 July 2012 | Inside the institutions

Revolving doors: staff turnover between IFIs and African governments

The term 'revolving doors' refers to frequent staff turnover between institutions, usually relevant when these represent different interests working on the same policy issues. This serves to foster cross-institutional networks, practices and alliances. The staff turnover between international financial institutions (IFIs) and borrowing governments works as a mechanism through which specific ideas and practices learnt and promoted in IFIs are translated into policies in borrowing countries

IFI governance

Background

7 February 2012 | Inside the institutions

IMF resources: quota, NAB and GAB

One of the IMF's three roles is lending to members countries with balance of payments difficulties, using resources provided by its other members. Generally, these resources come in two forms: quota contributions tied to voting rights in the institution, and bilateral contributions which do not affect countries' voting rights.

IFI governance

Background

18 November 2011 | Inside the institutions

Country classifications

A state's relationship with the IFIs and the type of assistance it receives is determined by its country classification. Some crucial types of classifications are: the World Bank's operational lending categories; the Bank's analytical categories used in the World Development Report; the IMF's operational and analytical categories, the IFC's frontier market category; the Bank's fragile state category; and the distinctions used by the Bank and IMF in deciding on and reporting success in governance

IFI governance

Background

14 September 2011 | Inside the institutions

China and the World Bank

China joined the World Bank in April 1980, and since then has been one of its largest borrowers and recipients of technical assistance. In recent years, China has gone beyond the only role of recipient country and has increased its influence on the Bank.

IFI governance

Background

12 October 2010 | Minutes

Investment lending reform

A briefing by World Bank staff on the investment lending reform, 9 October 2010

IFI governance

Background

19 July 2010 | Minutes

Meeting of UK NGOs and Susanna Moorehead, UK Executive Director to the World Bank, and Rachel Turner

Notes of the meeting

Infrastructure

Background

23 April 2010 | Minutes

Roundtable on post-crisis economic recovery

World Bank event at the World Bank spring meetings 2010, 22 April

IFI governance

Background

30 March 2010 | Minutes

Meeting between UK civil society and Alex Gibbs, UK IMF Executive Director

Minutes of a meeting between UK civil society, UK IMF Executive Director Alex Gibbs, and UK Treasury staff

Environment

Background

8 October 2009 | Minutes

CSO Townhall meeting

Notes from the CSO townhall meeting with Dominique Strauss-Kahn and Robert Zoellick

IFI governance

Background

8 October 2009 | Minutes

IMF governance - CSO meeting with the IMF managing director

Minutes of a meeting between civil society organisations, IMF managing director Dominique Strauss-Kahn and IMF deputy managing director John Lipsky

IFI governance

Background

4 October 2009 | Minutes

Global economic governance roundtable

Summary of a discussion with German government representatives, Jomo KS of the UN and civil society organisations.

IFI governance

Background

29 September 2009 | Minutes

Videoconference between UK civil society and Alex Gibbs, UK IMF Executive Director

Minutes of a meeting between UK civil society, UK IMF Executive Director Alex Gibbs, and UK Treasury staff

IFI governance

Background

10 July 2009 | Inside the institutions

The International Center for the Settlement of Investment Disputes (ICSID)

The International Center for the Settlement of Investment Disputes (ICSID), part of the World Bank Group, is an arbitration forum between governments and foreign investors to settle investment disputes. Two thirds of international investment disputes go through ICSID.

IFI governance

Background

23 April 2009 | Minutes

G20 Summit and impacts on developing countries

Summary of IMF and World Bank presentations and the discussion afterwards

IFI governance

Background

23 April 2009 | Minutes

Meeting between UK civil society and Douglas Alexander, Secretary of State for International Develop

Minutes of a meeting between Douglas Alexander, Secretary of State for International Development, and UK NGOs, 21 April 2009

IFI governance

Background

20 April 2009 | Minutes

Meeting between UK NGOs and Susanna Moorehead, UK World Bank Executive Director

Minutes of a meeting between UK civil society and UK World Bank Executive Director Susanna Moorehead

IFI governance

Background

15 April 2009 | Minutes

Meeting between UK civil society and Alex Gibbs, UK IMF Executive Director

Minutes of a meeting between UK civil society, UK IMF Executive Director Alex Gibbs, and UK Treasury staff

IFI governance

Background

1 April 2009 | Inside the institutions

The IMF's special drawing rights (SDRs)

The special drawing right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.

IFI governance

Background

9 October 2008 | Minutes

Transparency at the World Bank and IMF

Links to GTI principles, reviews of Bank performance on transparency, and a new paper on IMF transparency.

Environment

Background

25 July 2008 | Minutes

Highlights: Meeting of UK NGOs with UK Alternate Executive Director to the World Bank

Meeting between UK NGOs and UK Alternate Execituve Director to the World Bank -Caroline Sergeant- on July 22, 2008.

IFI governance

Background

11 April 2008 | Minutes

Briefing on the World Bank's Six Strategic Themes

Minutes of a briefing by World Bank staff on the WBG's six strategic themese

IFI governance

Background

10 April 2008 | Minutes

Briefing on the new IFC-IDA Secretariat

Notes from a briefing by World Bank staff on the new IFC-IDA joint secretariat

IFI governance

Background

1 February 2008 | Inside the institutions

The IFIs and Islamic finance

The World Bank Group and the IMF have become more involved in assistance to and oversight of Islamic financial institutions.

IFI governance

Background

26 October 2007 | Minutes

Rethinking the governance of the IMF

Highlights of a 19 October discussion on the reform of IMF governance at the World Bank-IMF annual meetings 2007.

IFI governance

Background

26 October 2007 | Minutes

The role of low-income countries in IFI governance

Highlights of a 19 October discussion on the role of low-income countries in IMF governance at the World Bank-IMF annual meetings 2007.

IFI governance

Background

25 June 2007 | Minutes

Highlights of UK NGO meeting with UK Executive Director to the WB/IMF Tom Scholar

Highlights of a 22 June 2007 meeting between UK NGOs and UK executive director to the World Bank and IMF, Tom Scholar. Issues covered included review of the Bank's transport strategy, avoided deforestation, conditionality, debt, social protection and IFI governance.

IFI governance

Background

9 May 2007 | Minutes

Highlights of BWI-UK / UKAN Workshop: The roles of the IFIs in low-income countries

Highlights/summary of outcomes for the 1 May 2007 BWI-UK / UKAN Workshop: The roles of the IFIs in low-income countries

IFI governance

Background

27 April 2007 | Minutes

Reforming the governance of the IMF / World Bank

Highlights of a civil society dialogue on Bank/Fund governance during the spring meetings 2007

IFI governance

Background

27 April 2007 | Minutes

European CSO meeting with European IMF EDs

Incomplete minutes of European CSO meeting with European IMF EDs, 13 April 2007

Conditionality

Background

25 April 2007

Workshop on aid and the roles of the World Bank and IMF in low-income countries

To date there have been gaps in the thinking and policy lines of UK NGOs on several key questions in relation to low-income countries, multilateral institutions and development. The 1 May 2007 workshop will bring the BWI-UK and UKAN networks together to address the following four questions, with a view to coordinating policy and advocacy positions: 1. What role do/should the IMF and World Bank be playing in the evolving international aid architecture? 2. Should the IMF be providing dev

IFI governance

Background

23 April 2007 | Minutes

Highlights of UK NGO meeting with HM Treasury on IMF governance

Minutes of a consultation between UK NGOs and HM Treasury on IMF governance, 4 April 2007

Infrastructure

Background

18 April 2007 | Minutes

Highlights of meeting with Tom Scholar and UK NGOs

Highlights of meeting between Tom Scholar and UK NGOs, April 2007

IFI governance

Background

31 January 2007 | Inside the institutions

The IMF programme cycle

The IMF has regular, systematic engagement with government representatives at many levels. Implementation of the IMF’s programme cycle varies from one country to the next, depending on the situation and need of the country in question. The nature of the programme cycle is highlighted by looking at the cases of Uruguay and Mozambique.

IFI governance

Background

15 November 2006 | Minutes

Global Transparency Initiative (GTI) - regional launch

This is a summary of the Global Transparency Initiative (GTI) regional launch held at Westminster on the 2nd of November 2006.

IFI governance

Background

26 October 2006 | Minutes

Highlights of Hilary Benn meeting with UK NGOs

Highlights of semi-annual meeting between UK Secretary of State for International Development and UK NGOs. Topics covered include CSO access to annual meetings, conditionality, anti-corruption, odious debt, clean energy, education in LICUS, bank internal governance, IFC safeguards

IFI governance

Background

26 September 2006 | Minutes

Highlights of Tom Scholar meeting with UK NGOs

Highlights of quarterly meeting between UK executive director to the World Bank and IMF and UK NGOs. Topics covered include CSO access to annual meetings, IMF strategic review, conditionality, anti-corruption and education.

IFI governance

Commentary

12 September 2005 | Guest comment

Giant taming: 10 years of the Bretton Woods Project

Director, European Network on Debt and Development; Coordinator, Bretton Woods Project, 1995-2004

IFI governance

Background

22 April 2005 | Minutes

Workshop on parliamentary scrutiny

Parliamentarians from eight countries present the international parliamentarians' petition to the Bank and Fund

IFI governance

Background

5 October 2004 | Minutes

Bretton Woods Institutions should “start a new life”: Chinese central bank governor

A panel was held with southern country officials to discuss the democratic deficit at the World Bank and IMF.

IFI governance

Background

17 November 2003 | Inside the institutions

The World Bank and civil society

A brief look at the history of World Bank-CSO relations, who's who in the World Bank for civil society actors and some future steps planned by the Bank.

IFI governance

Background

1 April 2003 | Inside the institutions

The World Bank and gender

A brief summary of how gender is - or is not - incorporated into World Bank programmes and policies, with links to further resources from both inside the Bank and its critics.

Latest articles on this issue

IMF Board of Governors, Bali, Indonesia, 2018

IFI governance

Background

IMF and World Bank decision-making and governance

This Inside the Institutions looks at decision-making and governance structures at the IMF and World Bank.

7 April 2020 | Inside the institutions

IFI governance

News

Quota reform impasse likely as IMF faces legitimacy crisis

Latest Review of Quotas expected to be quashed, as US signals it will block reform.

30 July 2019

IFI governance

News

US blocks IMF voting rights redistribution

Fund’s 15th review of quotas delayed as US blocks redistribution of voting rights.

12 December 2019

IFI governance

News

IMF quota reforms: The fight for democratic governance continues

Uneven votes shares and global power imbalances shape the IMF voting shares, as it prepares to shake up its voting quotas

6 December 2018

Conditionality

Analysis

IMF “rebuked” over role in Troika and its lending to Greece, Ireland and Portugal

IMF’s Independent Evaluation Office has found the Fund’s 2010/2011 Troika lending to Greece, Ireland and Portugal fell short in terms of surveillance, design, implementation and decision making, and described controversial decisions as appearing “rubber-stamped”.

23 September 2016

IFI governance

Background

IMF & World Bank decision-making and governance (archive)

This Inside the Institutions examines the recent and ongoing reforms at the IMF and World Bank, and places them in context of existing structures and processes.

31 March 2016 | Inside the institutions

IFI governance

Analysis

IMF governance: one step forward, one step back

Reform to the IMF’s voting shares shifts some power to emerging countries, but the institution’s leadership selection process remains opaque and undemocratic.

8 February 2016

IFI governance

News

Developing countries seek to bypass stalled IMF and World Bank reform, risking US veto

Reforms to World Bank and IMF voting shares continue to stall, leaving developing countries with no greater say in how they are run.

25 September 2015

IFI governance

Analysis

Impasse at the IMF

This briefing shows that multilateral governance is at risk if long-overdue IMF quota and board reforms are not ratified.

31 March 2015 | At Issue

IFI governance

News

Developing countries seek new path for Fund governance reform

2010 agreement to reform IMF voting shares in favour of developing countries flounders as IMF governance reforms blocked by US Congress, again. Developing countries expressed anger and raised concerns about the Fund’s ability to deal credibly and effectively with new and ongoing financial crises.

8 May 2014