IFI governance


IMFC chair’s statement analysis Annual Meetings 2023: Fine words but little of substance as critical decisions kicked down the road

18 October 2023

IMF Managing Director Kristalina Georgieva, Communications Department Director Julie Kozack, and IMFC Chair and Spanish Minister of Finance and Digital Transformation Nadia Calviño participate in the IMFC Press Conference during the 2023 Annual Meetings of the World Bank Group and International Monetary Fund in Marrakech, Morocco on October 14, 2023. Credit: IMF Photo/Sarah Silbiger

Divisions over the Ukraine war have again prevented the IMFC from issuing a communiqué for the fourth consecutive time. The IMFC’s Chair, Nadia Calviño, First Vice President of Spain and Minister for Economy and Digitalization, issued a chair’s statement instead.

The statement’s preamble mentioned the human suffering caused by the earthquakes in Morocco and Afghanistan and the flooding in Libya, but focused on the impact of war, especially in Ukraine. According to the chair, “most” members “recognized that Russia’s invasion of Ukraine has continued to have massive humanitarian consequences, as well as a detrimental impact on the global economy, and they strongly condemned it.” However, it conceded that, “There were other views and different assessments of the situation.” Russia is a member of the IMFC.

The chair’s statement stressed the challenges the global economy faces, including high debt burdens, tight fiscal conditions, intensifying climate shocks, increasing numbers of refugees and the displaced, rising inequality, food insecurity and fragmentation, noting that the burden of these issues falls disproportionately on vulnerable countries and people. However, it fell short of announcing much of actual substance. Other than a commitment to IMF quota reform (coupled with an admission it was not in immediate prospect) and support for a third chair on the executive board for Sub-Saharan Africa, much of the statement read as a laundry list of issues the committee either intended to make progress on or on which it supported initiatives taken by others.

IMF once again kicks the can down the road on quota reform

The chair’s statement affirmed a strong commitment to concluding the 16th review of quota reform by 15th December, supporting a “meaningful” increase in quota shares “that at least maintains the Fund’s current resource envelope.” It called on the executive board to implement transitional arrangements to maintain IMF resources until this additional funding becomes available, if necessary. The statement noted that a quota realignment that better reflects members’ relative economic weight, while protecting the shares of the poorest countries, was of “urgency and importance”. Among other things, this would involve increasing China’s quota share and reducing that of the US and Europe. A quota realignment would go some way toward addressing the IMF’s democratic governance deficit, which risks undermining the fund’s credibility and legitimacy (see Observer Autumn 2023).

However, a quota realignment is not in immediate prospect, despite a commitment from the IMF board of governors to do so in the 16th review, after the US unilaterally blocked quota reform in the 15th review in 2020. The chair  called on the executive board to develop possible new proposals for the quota realignment, potentially including a new quota formula, by June 2025, under the 17th General Review of Quotas.

On 13 October, US Treasury Secretary Janet Yellen said her plan for an equiproportional increase in quotas, which would be allocated to all members in proportion to their existing quotas, thus preserving their current voting share, was “pretty likely to get done”. The US has conditioned a quota realignment on China “respecting the roles and norms of the IMF and working to strengthen the international monetary system.” According to Georgieva’s intervention at the V20 ministerial on 15 October, the IMF executive board is currently negotiating an equiproportional quota increase of 35-50 per cent (see Dispatch Annuals 2023).

The IMFC also called for the creation of a 25th chair on the IMF’s executive board for Sub-Saharan Africa, to supplement the two existing Sub-Saharan African chairs. This would increase African representation on the board, and would be at least a step toward rebalancing the organisation’s decision-making apparatus away from its current Western dominance, as long demanded by the G24, the G77 and as proposed in the Bridgetown Initiative.

Delay in reviewing surcharge policy will cost heavily indebted states dearly

The chair’s statement also noted that the IMFC would “consider a review of surcharge policies.” Surcharges are punitive interest rates of 2 per cent imposed on countries that borrow above 187.5 per cent of their quota via the IMF’s General Resources Account (GRA), which increases by an additional 1 per cent after 36 months (see Inside the Institutions, What are IMF surcharges?; Observer Spring 2022). Civil society has argued they are regressive as they penalise middle-income countries that need IMF assistance, pushing a disproportionate share of the burden of an adequately resourced Fund onto these heavily-indebted states. Surcharges can result in debt costs increasing by as much as three times (see Observer Summer 2021). A further delay in eliminating surcharges could cost affected countries billions, significantly adding to their debt burdens and restricting the funding available to achieve the Sustainable Development Goals.

Support for conflict-affected state strategy mainstreaming

The IMFC also supported the mainstreaming of its fragile and conflict-affected state strategy. The Fund launched this strategy in March 2022 after a period of consultation (see Observer Summer 2022). There are serious concerns with the Fund’s narrow interpretation of this strategy, and its failure to link the strategy to macro-economic policies it promotes that erode the social contract and drive social and political instability. The IMF’s record in assessing state fragility is hardly stellar: In February 2011, it claimed that both Tunisia and Libya were ‘low risk’ even though former Tunisian President Ben Ali had just been forced out by popular protests, and as the protests that forced Libyan Leader Muammar al-Gaddhafi out and led to that country’s long and bitter civil war were about to kick off (see Observer Autumn 2023).