What is the IMF?
- The International Monetary Fund was founded in 1944 by 45 member states to provide financial support to its members when needed.
- It now includes almost every country in the world and is the main decision-making body on the global financial system.
- The IMF lends money to developing countries subject to strict economic policy conditions, including, for example, cuts in public spending, privatisation of public services and trade liberalisation.
What are some of the problems with the IMF?
- The voting system is not democratic; rather than one nation, one vote, it is weighted according to economic variables.
- This gives developed countries the majority of votes, although they are a small minority of the membership and of the world population, and developing countries are much more affected by IMF policies.
- The USA alone has enough votes to veto major policy decisions.
- The Managing Director of the IMF is always a Western European, selected by Western European governments.
- Policy decisions are essentially made by the Executive Board. The Managing Director largely sets its agenda, approves all decisions it considers, and determines the outcome of the meeting.
- Only five member countries (all developed) have the right to appoint their own Executive Directors, and effectively control what he/she says in the Board.
- Other countries are represented by “elected” Executive Directors, who are under no obligation to take into account their views or interests and are subject to no effective mechanisms for accountability.
- Executive directors for developing countries have constituencies of up to 24 countries, which makes for very heavy workload and a complex balancing act between conflicting interests.
- Executive Board meetings are secret, making it impossible to determine how votes have been used.
- Loans and debt relief are subject to economic conditions that can be extremely harmful to developing countries.
What reforms are needed?
- A democratic, transparent voting system that gives a fair and representative share of the votes to developing countries.
- Democratic and merit-based selection of the Managing Director.
- Effective mechanisms to ensure accountability of Executive Directors to their constituents and of the Managing Director to the Executive Board.
- Removal of politically intrusive and harmful economic conditions from loans and debt relief.
For a more detailed paper on IMF governance see IMF 2-page Issue Brief by David Woodward.