Abstract

The author-a top decision maker at the IMF for two decades-first focuses on the system of quotas and voting power in the IMF and concludes that it calls for reforms to enhance equity among the membership. He then examines decision making in the Executive Board, with an emphasis on consensus building in a cooperative institution, and the record of political oversight of the international monetary system through the Interim Committee and its successor, the International Monetary and Financial Committee. In that context, the author also comments on the impact on IMF decision making of the activities of groups of members, and of the differing interests of major shareholders. Thereafter, he recalls the distinctive features of the financial crises of the 1990s and examines their evolving implications for IMF governance. The essay concludes with an appraisal of IMF governance.

Governance of the IMF Decision Making, Institutional Oversight, Transparency, and Accountability

Leo Van Houtven

INTERNATIONAL MONETARY FUND

Washington, D.C.

2002

ISBN 1-58906-130-6

ISSN 0538-8759

August 2002

The views expressed in this pamphlet, including any legal aspects, are those of the author and should not be attributed to Executive Directors of the IMF or their national authorities.

Cover design and typesetting: IMF Graphics Section

Please send orders to:

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Internet: http://www.imf.org

Contents

  • Preface

  • List of Abbreviations

    • I. Introduction

    • II. Quotas and Voting Power in the IMF: A System That Calls for Greater Equity

      • Role of Quotas and the Debate on the Quota Formula

      • Further Work Toward Correcting Distortions and Enhancing Equity in Voting Power

    • III. Checks and Balances in the Governance of the IMF

      • The Executive Board

      • The Managing Director

      • The Staff

    • IV. Consensus Decision Making in a Cooperative Institution

      • Size and Composition of the Board: A Global Roundtable

      • General Approach to Consensus Building in the Board

      • Consensus Building and Decision Making in Practice

      • Protecting the Consensus Model and Safeguarding the Rights of Minority Shareholders in the IMF

    • V. Enhancing Political Oversight of the International Monetary System

      • The Interim Committee: A Mixed Leadership Record

      • The International Monetary and Financial Committee: Toward More Effective Systemic Oversight?

      • The Intergovernmental Group of 24: Cohesion Weakened by Diverging Interests of Members

      • The Group of Five and the Group of Seven: Leading or Overbearing?

      • Competing Interests: The United States, Western Europe, and Japan and the Asian Region

    • VI. IMF Governance in a Crisis: Mexico, 1994-95

    • VII. Implications for IMF Governance of the Financial Climate of the 1990s

      • Distinctive Features of the Crises, 1997-99

      • Strengthening the Financial Architecture

      • Collaboration Between Civil Society and the IMF

      • The Pursuit of IMF Transparency

      • The Task of Refocusing the IMF

    • VIII. An Appraisal of IMF Governance

    • Appendix I. Voting Majorities in the IMF

    • Appendix II. IMF Executive Directors and Voting Power

    • Bibliography

Preface

The author, Leo Van Houtven, is President of the Per Jacobsson Foundation, which was established in honor of the former Managing Director of the IMF (1956-63). The Foundation sponsors lectures in international finance and monetary cooperation in the context of the Annual Meetings of the IMF and, on a number of occasions, of the Bank for International Settlements in Switzerland. The author made his career in the IMF. From 1977 through 1996, he was the Secretary of the IMF and in 1987 he received the additional title of Counsellor to the Managing Director.

The views expressed in this essay are those of the author and should not be attributed to the IMF. The author continues to benefit greatly from his contacts and discussions with former colleagues on the IMF’s Executive Board and on the staff. He wishes to thank Christian Brachet, Eduard Brau, François Gianviti, Luc Hubloue, Azizali Mohammed, Alexander Mountford, P.R. Narvekar, Barry Newman, and J.J. Polak for their stimulating comments on the essay in progress. The author is responsible for remaining weaknesses. He also wishes to thank Ian McDonald, who edited the text, Marina Primorac, who coordinated the production, and Nabila Salah for her administrative assistance throughout the project.

List of Abbreviations

BIS

Bank for International Settlements

EMS

European Monetary System

ESAF

Enhanced Structural Adjustment Facility

DDS

Data Dissemination Standard

FSAP

Financial Sector Assessment Program

GAB

General Arrangements to Borrow

HIPC

Heavily Indebted Poor Countries

IAIS

International Association of Insurance Supervisors

IBRD

International Bank for Reconstruction and Development (World Bank)

IEO

Independent Evaluation Office

IMF

International Monetary Fund

IMFC

International Monetary and Financial Committee

IOSCO

International Organization of Securities Commissions

NAB

New Arrangements to Borrow

NAFTA

North American Free Trade Area

NGO

Nongovernmental organization

OECD

Organization for Economic Development and Cooperation

PDR

Policy Development and Review Department

PFP

Policy Framework Paper

PIN

Public (formerly Press) Information Notice

PRGF

Poverty Reduction and Growth Facility

ROSC

Report on Observance of Standards and Codes

SDR

Special Drawing Right

SRF

Supplementary Reserve Facility

WTO

World Trade Organization

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