Bringing Balance to the IMF Reform Debate – New Rules for Global Finance Coalition

Bringing Balance to the IMF Reform Debate

New Rules’ “Bringing Balance to the IMF Reform Debate” project consisted of a series of regional meetings in 2008 among IMF “client” countries — those that borrow from the IMF or are reliant on its policy prescriptions or approval. Core partners for this project included New Rules for Global Finance, the Centre for International Governance Innovation, and the Global Economic Governance Programme at the University of Oxford.

The Bringing Balance to the IMF Reform Debate initiative brought together finance ministers, central bankers, and senior advisors from the regions to elaborate their priorities for a reformed IMF in terms of its roles, core functions, representation and accountability. The constructive recommendations which emerged from this extensive consultative process were integrated into the synthesizing global conference hosted by CIGI in Waterloo, Ontario in July 2008. The conference’s discussions and sets of recommendations called for the IMF to reform its policy requirements, surveillance reports, representation, and accountability, in order to increase the confidence of both emerging and developing countries in the Fund’s usefulness.

The regional meetings focused on two areas of work, both of which were addressed in terms of what is needed and appropriate for the specific regions in the 21st century:

*Policies and products that the IMF and other IFIs could provide, which would be most relevant to the current status of each region’s real and financial economies (e.g., the Fund’s program design and catalytic lending roles, ownership and capacity-building issues, and long-term capacity); and

*Regional positions and options on governance issues (such as development of a new quota formula, increasing regional voice, representation and diversity of Fund staff, selection of principal managers, role for double majorities, and accountability of the Board and Management of the Fund).

Background

There is wide consensus that the International Monetary Fund (IMF) requires reform. Its governance reflects the political powers of 1944; its largest “customers,” the emerging market economies (EMEs), have taken out expensive self-insurance rather than submit to its policy requirements, leaving only the low income countries (LICs) subject to its oversight and policy requirements. Indeed the new Managing Director (MD), Dominique Strauss-Kahn, begins his Interim Work Program by assuring the Executive Board that “I have aimed to impart a renewed sense of urgency to the reform of the Fund.” (14 December 2007). Despite this broad consensus, the debate on IMF reform has been shaped largely by conversations within and among OECD countries and orthodox or mainstream economists. Largely absent have been the views, interests and priorities of developing countries, the IMF’s “customers.”

Before detailing the specific strategy and processes of this project, it is important to address two important questions:

1) Is the Fund needed?

Yes. Financial crises harm the poorest people and countries the most. The poorest countries face a regular cycle of financial crises, often linked to commodity prices, crises that wipe out years of growth within months and require many years to rebuild up to the level when the crisis struck. There is no other global institution designed to address global financial crises, and the world needs one.

2) Is the Fund reformable?

Yes. It will require a lot of work, involving outsider and insider pressure, governance reform, clarification of functions, and commitment by all member countries to use it to promote the common good of global financial stability that supports equitable and sustainable growth, rather than to protect narrow, short-term national interests.

Partner Organizations

Other Collaborating Organizations