The IMF has announced that it plans to boost the voting shares of big, rapidly growing developing countries, particularly China. And the IMF will organize multilateral consultations with top officials from large countries about how their economic policies affect each other and the world--going beyond traditional single-country consultations. The moves would boost the IMF's legitimacy and relevance.
The precise details of the increased voting shares have yet to be worked out. IMF managing director Rodrigo de Rato told reporters on Saturday that the Fund’s governing body, the International Monetary and Financial Committee (IMFC), had given him a mandate to propose specific changers at the Annual Meetings of the IMF and the World Bank in Singapore next September. (See Paul Blustein's article in the Washington Post for one account; and CGD President Nancy Birdsall's new blog posting on the implications for the World Bank: World Bank Unlikely to Quickly Follow Smart IMF Lead on Representation - Too Bad!)
"I have spoken several times about the need for increased in voting power for some countries, including a number of emerging market economies, to ensure that they have a role in the Fund's decision-making process that accords with their increased importance in the world economy," de Rato said. He said that he would respond to the mandate with specific proposals at the meetings in Singapore.
He described the planned multilateral consultations as "something new for the institution and also for its members" and said that such a cooperative approach would benefit all concerned.
"The planned increase in developing country representation and the multilateral consultations show that de Rato is determined to address challenges to the IMF's legitimacy and relevance," said CGD senior fellow Liliana Rojas-Suarez, an international finance expert who previously worked on Wall Street and for the IMF. "The role of the IMF in the international financial system, while evolving, is as relevant as ever."
Rojas-Suarez, who also chairs the Latin America Shadow Financial Regulatory Committee, is one of the many voices who have been urging increased emerging market representation on the IMF board. (See Whither the IMF? Q&A with Liliana Rojas Suarez)
Similarly, Kemal Dervis, a former CGD non-resident fellow who is now head of the United Nations Development Program, put forward suggestions for improved governance of the IMF and other multilateral institutions in a CGD book, A Better Globalization: Legitimacy, Governance, and Reform.
The latest contribution to this growing body of work was released on Friday, as the Bank/IMF Spring Meetings were getting underway, when CGD and the Carnegie Endowment for International Peace sponsored the launch of a new book by CGD Advisory Board Member Ngaire Woods, The Globalizers: The IMF, the World Bank, and Their Borrowers.
A CGD Brief by Woods also released at the event (see: The Globalizers in Search of a Future: Four reasons why the IMF and World Bank must change, and four ways they can) distilled several of the book's most important recommendations, including suggestions for a greater voice for developing countries in both the World Bank and the Fund.
One simple reform: require not only a majority of voting power but also a majority of when the Board makes decisions. "This would give powerful vote-holders (such as the U.S. and Europe) an incentive to consult and join forces with those who have few votes but represent a larger number of borrowing countries," Woods writes in the CGD brief.