About the IEO

Established in 2001, the Independent Evaluation Office (IEO) of the IMF conducts independent and objective evaluations of the IMF’s policies, activities, and products. In accordance with its terms of reference, it pursues three interrelated objectives:

• To support the Executive Board’s institutional governance and oversight responsibilities by contributing to accountability.

• To enhance the learning culture within the Fund by increasing the ability to draw lessons and integrate improvements

• To strengthen the Fund’s external credibility through enhanced transparency.

For further information on the IEO and ongoing and completed evaluations, please see IEO-IMF.org or contact the IEO at +(1) 202.623.7312 or at IEO@IMF.org.

This report is the ninth in an IEO series that revisits past evaluations. Reports in this series aim to determine whether the main findings and conclusions of the original IEO evaluation remain relevant, and to identify any outstanding or new issues related to the evaluation topic that merit continued attention. These assessments do not provide recommendations and are typically based on desk reviews of IMF documents and interviews of IMF staff and members of the Executive Board. This report reviews the 2008 IEO evaluation of IMF governance.

IEO

Independent Evaluation Office

of the International Monetary Fund

GOVERNANCE OF THE IMF

EVALUATION UPDATE 2018

Some of the documents cited and referenced in this report were not available to the public at the time of publication of this report. Under the current policy on public access to the IMF’s archives, some of these documents will become available three or five years after their issuance. They may be referenced as EBS/YY/NN and SM/YY/NN, where EBS and SM indicate the series and YY indicates the year of issue. Certain other types of documents may become available 20 years after their issuance. For further information, see IMF.org/external/np/arc/eng/archive.htm.

©2018 International Monetary Fund

CATALOGING-IN-PUBLICATION DATA IMF LIBRARY

Names: Kim, Jun (Jun Il). | Casas, Miguel de las. | Abrams, Alisa. | Lamdany, Ruben. | International Monetary Fund. Independent Evaluation Office.

Title: Governance of the IMF : evaluation update.

Description: Washington, DC : Independent Evaluation Office of the International Monetary Fund, 2018 | “This report was prepared by a team led by Jun Il Kim, including Miguel de Las Casas and Alisa Abrams, in consultation with Ruben Lamdany.” | Includes bibliographical references.

Identifiers: ISBN 9781484373439 (paper)

Subjects: LCSH: International Monetary Fund—Evaluation. | Corporate governance.

Classification: LCC HG3881.5.I58 G684 2018

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Contents

• FOREWORD

• CONTRIBUTORS

• ABBREVIATIONS

• EXECUTIVE SUMMARY

• 1. INTRODUCTION

• 2. THE 2008 IEO EVALUATION

• 3. POST-EVALUATION DEVELOPMENTS

  • Quota and voice reforms

  • Executive Board

  • Management

  • International Monetary and Financial Committee

• 4. CURRENT STATE OF IMF GOVERNANCE

  • Executive Board

  • Management

  • International Monetary and Financial Committee

• 5. CHALLENGES GOING FORWARD

• BOXES

  • 1. The Committee on IMF Governance Reform Report and the Fourth Pillar Report

  • 2. The Independent Evaluation Office and IMF Governance

• FIGURES

  • 1. Voting Share Relative to Economic Weight, 2007 versus 2017

  • 2. Distribution of Board Time, 2010–17

  • 3. Monthly Board Meetings, 2010–17

  • A3.1. Board Activity Indicators

  • A3.2. Bunching Ratio and Standard Deviation

  • A3.3. Board Items Approved on a Lapse of Time Basis

  • A3.4. Tenure of Executive Directors

  • A3.5. Net Budget Envelope by Department

  • A3.6. Program-Related Activity by Constituency, 2008–17

  • A3.7. Share of Board Meeting Hours by Chair

• APPENDICES

  • 1. 2008 IEO Evaluation Recommendations: Implementation Status.

  • 2. The Follow-Up Process for the 2008 IEO Evaluation

  • 3. Executive Board Indicators

• REFERENCES

• STATEMENT BY THE MANAGING DIRECTOR

Foreword

Strong governance is essential for an institution like the IMF to meet its mandate and fulfill the needs of its members. This report provides a stocktaking of IMF governance ten years after the comprehensive 2008 IEO evaluation of Governance of the IMF. It recognizes concrete progress across a number of fronts to improve the IMF’s governance structure— but also brings attention to some continuing issues and some new challenges.

The most notable development in IMF governance over the past decade was the 2008 and 2010 “share and chair” reforms, which led to a meaningful increase in the voice of emerging market and developing countries in IMF governance. Efforts have also been made to strengthen the Executive Board’s capacity to play its strategic role, to make the process of MD selection more open, and to enhance the role of the IMFC.

Despite these efforts, the update finds that, as was the case at the time of the original evaluation, the balance of the IMF’s governance structure remains weighed in favor of effectiveness and efficiency, while accountability and representation continue to raise concerns.

The Fund was able to respond quickly and effectively in the face of the global financial crisis and subsequent shocks, sustaining the IMF’s long-time reputation as an institution that delivers. However, the update also finds that the task of ensuring adequate member country representation in the governance structure remains a work in progress, that the Executive Board continues to feel constrained relative to Management in IMF decision-making, and that the selection process for Management continues to deliver outcomes dominated by nationality considerations. The rise of the less representative G20 with its Leaders’ track since 2008 has helped to achieve collective global action when needed but also at times threatened to overshadow the IMFC’s provision of strategic direction to the IMF.

There is a lingering concern that representation and accountability issues if not adequately addressed will erode the IMF’s legitimacy and eventually its effectiveness. However, difficult trade-offs are involved: the challenge of strengthening the role of the Executive Board while preserving Management’s operational latitude; the pressure to consider the management selection process in the IMF together with other international financial institutions; and the need to balance effectiveness and representation in any refinements to the relationship between the Fund and the G20. It will take more than internal processes to address these challenges: it will also require collective commitment and goodwill across the membership.

It is my hope that this report will help to inform stakeholders about the current state of IMF governance and continuing challenges, particularly in the context of the 15th General Review of Quotas. I also welcome the Managing Director’s statement that the update provides a good basis for dialogue on a stronger, more representative, more accountable, effective, and efficient Fund.

Charles Collyns

Director, Independent Evaluation Office

Contributors

This report was prepared by a team led by Jun Il Kim, including Miguel de Las Casas and Alisa Abrams, in consultation with Ruben Lamdany, the author of the 2008 evaluation report. The report also benefited from discussions with external experts. Joshua Wojnilower provided research assistance; Arun Bhatnagar and Annette Canizares provided administrative assistance; and Roxana Pedraglio and Esha Ray provided editorial and production management assistance. The report was approved by Charles Collyns.

Abbreviations

Executive Summary

In 2008, the IEO undertook an evaluation of IMF governance with regards to effectiveness, efficiency, accountability, and voice. Based on findings on each of the Fund’s main governance bodies—the Executive Board, Management, and the International Monetary and Financial Committee (IMFC)—it concluded that effectiveness had been the strongest aspect of IMF governance, while accountability and voice had been the weakest.

Since then, a series of reforms have strengthened IMF governance in a number of ways. The 2008 and 2010 quota and voice reforms achieved a sizable reduction in misalignments of member country voting power with the evolving global economy. Other governance reforms, mainly related to the Executive Board’s practices and procedures, have improved efficiency and the Board’s scope for providing strategic input. The introduction of Board self-evaluation, a more open archives policy, modifications to the Managing Director’s accountability framework, and the creation of the Office of Risk Management are steps towards greater accountability and learning.

Notwithstanding these considerable advances, this report finds that the balance of the IMF’s governance structure remains weighed in favor of effectiveness and efficiency, while accountability and voice have continued to raise concerns which if unaddressed could affect IMF legitimacy and, ultimately, effectiveness. IMF governance has proven effective in supporting the Fund’s capacity to fulfill its mandate, particularly in responding to the global financial crisis and subsequent shocks. However, the quota and voice reforms are not considered sufficient by much of the membership and the alignment of “shares and chairs” remains a work in progress as discussions now proceed with the 15th General Review of Quotas. Many Executive Directors (EDs) feel that the Executive Board’s capacity for strategic oversight is still constrained, that Management continues to play a dominant role in the decision-making process, and that the modified management accountability framework has limited practical impact. Notwithstanding steps to open the nominations process for the Managing Director (MD), the selection process for both the MD and Deputy Managing Director positions is still viewed by many stakeholders as insufficiently transparent and merit-based as well as too limited by nationality considerations. The IMFC’s provision of strategic direction to the IMF is seen by some members as at times overshadowed by the less-representative G20.

These findings suggest continuing challenges for IMF governance. These challenges cannot be fully addressed by internal processes alone but will depend on collective commitment and goodwill across the membership. Meeting them will require facing multiple, difficult trade-offs among governance objectives. Three in particular merit emphasis. First, achieving a stronger and more representative Executive Board would need to be balanced against the need to preserve Management’s operational latitude to run the institution. Second, addressing the concerns posed by the management selection process at the IMF could ultimately depend on political commitment for broader reform of the selection of heads across international financial institutions. Finally, any refinements to the relationship between the IMF and the G20 would need to balance effectiveness and representation in the context of changing global economic conditions and the evolving focus of the G20.