CHAPTER 1 The Process of Policymaking

International Monetary Fund
Published Date:
February 1996
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Margaret G. de Vries

One of the distinguishing characteristics of the international economic scene since World War II is the existence of multi-member economic institutions, such as the International Monetary Fund. The Fund was established to substitute cooperation and consultation in monetary and financial affairs for the unilateral and independent decision-making concerning these matters in which countries had previously engaged. Subsequently, in accordance with its Articles of Agreement, the Fund has been evolving policies in the fields for which it has responsibility that are of considerable significance to its members.


The Fund’s attitudes and policies are an important factor circumscribing the monetary and financial policies of each member country. For several of its policies, a member is accountable to the Fund. Regular consultations between the Fund and the member provide the Fund with an opportunity to review and to criticize the monetary and financial policies being pursued by the member. Some actions contemplated by the monetary authorities of a member—such as a change in the exchange rate or the imposition of exchange restrictions—must receive the concurrence of the Fund even before these steps can be taken.

A member has a vested interest in securing the Fund’s approval: not only may the member then be regarded as one in good standing in the international economic community, but it is enabled should the need arise to draw upon the pool of resources which the Fund has at its disposal. Through the medium of the Fund, a member has opportunities to comment upon the policies of other members and, should it feel that its interests are adversely affected by the policies of another, it has the right to object.

Just as the Fund’s policies are of concern to a member individually, so are they important to its members collectively. These policies aim at making harmonious the conduct of trade and payments among all members. And, through the Fund, members as a group have worked out additional forms and techniques of international monetary cooperation as new problems in international trade and payments have arisen.

The upcoming chapters in this volume are devoted to explaining many of the specific policies of the Fund. This chapter provides background by describing the process by which these policies are formed. As an example of the machinery of international organizations, the process of policymaking in the Fund is, in fact, a subject of interest in itself. Because this process has changed significantly over the years, note is also taken of some of the important ways in which the process differs from that in the early years.


The process of policymaking in the Fund consists of a complex of relations between member governments, the Board of Governors, the Board of Executive Directors, the Managing Director, and the international staff, and the line of formal authority moreover proceeds in that order.


The Fund is, of course, an entity composed of its members. It is the members who determine the Fund’s policies. Thus the Fund can go only as far in fulfilling its objectives and deciding what policies will be pursued as its members will allow.

At the end of 1965 there were 103 members, compared with 40 at the end of 1946. Until 1960 the growth of membership was relatively slow; on average, there were about two new members each year. Thereafter membership increased sharply, as former colonial territories which had achieved their independence joined. These countries were especially eager to be admitted to the Fund, not only because of the benefits of such membership itself, but also because Fund membership is a condition for membership in the International Bank for Reconstruction and Development (the World Bank). Of the Fund’s 103 members at the end of 1965, 48 had not existed as sovereign states when the Fund was formed. Apart from the U.S.S.R., mainland China, and some countries closely associated with one or the other of these, the only considerable countries that were independent at the end of 1965 and had not joined the Fund were Cambodia, Switzerland, and Yemen.1

The composition of the Fund’s membership at the end of 1965, although roughly the same as that of the United Nations, differed in some important respects. Among the member countries of the Fund were some, such as Germany, Korea, and Viet-Nam, that were not members of the United Nations. On the other hand, the U.S.S.R. and states associated with it that were members of the United Nations were not members of the Fund. The U.S.S.R. sent a delegation to the Bretton Woods Conference and took an active part in the deliberations there; indeed, some of the Articles of Agreement were reworded in an effort to meet the points of view of the U.S.S.R. A member of the staff of the U.S.S.R. Purchasing Commission in Washington also attended as an observer the Inaugural Meetings of the Boards of Governors of the Fund and the Bank in March 1946. By that time, however, relations between the Soviet bloc and its wartime allies had sharply deteriorated, and the U.S.S.R. never joined the Fund. Poland, Cuba, and Czechoslovakia were original members, but the first two withdrew in 1950 and 1964, respectively, and Czechoslovakia’s membership terminated at the end of 1954.2

This composition of membership meant, inter alia, that the tensions of the cold war did not cause the same conflict among the Fund’s members as had occurred in the United Nations. On the contrary, rather quickly after the Fund’s establishment, members developed harmonious working relationships and a sharing of confidences concerning their economic situations and policies that, in all probability, would not have been possible if there had been acute political differences among the membership.

At the time that it joins the Fund, each member country agrees to a quota. These quotas play a unique role in the organization and operation of the Fund: they determine the contribution that a member makes to the Fund (and hence the size and composition of the Fund’s resources), the drawings permitted to members and the charges and repayments on these drawings, and members’ voting power.

No formal principles have been laid down for the determination of quotas. The quotas agreed at Bretton Woods for the original members were based on a complicated formula which employed various percentages of the member’s national income, its holdings of gold and U.S. dollars, and its average annual exports and imports. The idea was that quotas would be in accordance with the relative economic circumstances of members.

Although quotas of subsequent members have continued to be based primarily on their economic circumstances, a good deal of consideration is also given to fitting the quota into the existing structure of quotas. In accordance with its Articles, the Fund conducts a comprehensive review of quotas every five years. In 1958–59 and 1965–66, general increases for all members were proposed and accepted. There have also been many special increases in the quotas of individual countries. By early in 1966, the total of the Fund’s quotas had reached nearly $21 billion.

Unlike the United Nations and some other international organizations, members do not have to make periodic contributions for the administrative expenses of the Fund: these are met from the charges the Fund receives from its members for drawings from its resources. Although in its first ten years the Fund ran an annual deficit, subsequently there was a sharp rise in transactions, which increased the Fund’s income.

Board of Governors

As its highest-ranking representatives in the Fund, every member appoints a Governor (usually the Minister of Finance or the Governor of the central bank) and an Alternate Governor. In late September or early October of each year there is a meeting attended by all the Governors and Alternate Governors, held jointly with that of the World Bank. Because of the high-level representation of member countries at the Joint Bank-Fund Meetings, these meetings have become the occasion not only for conducting the immediate business of the Fund but also for holding informal discussions among members on a variety of financial matters of mutual concern. Such informal discussions have become part of the process by which international monetary cooperation has gradually been extended.

Although the Articles of the Fund provide also for special meetings of the Board of Governors, such meetings have never been called. Convening Governors—and by 1965 there were more than one hundred—from all over the world would be a cumbersome way to make decisions. When a vote of the Governors is needed, they are polled by mail or cable.

Executive Directors

The Articles also provide for Executive Directors who are to exercise whatever powers are delegated to them by the Board of Governors. At its Inaugural Meeting in 1946, the Board of Governors delegated to the Executive Directors all its powers except for a few reserved subjects, notably the admission of members and changes in quotas. The Board of Governors, however, retains authority to issue policy decisions for the guidance of the Executive Directors, and all decisions and actions of the Executive Directors may, upon the proposal of any member, be reviewed by the Board of Governors.

On December 31, 1965, the Executive Board consisted of twenty Executive Directors.3 The five members with the largest quotas—the United States, the United Kingdom, France, Germany, and India—are each entitled to appoint one Director. The two countries whose currencies are drawn on the most in the preceding two years are also entitled to appoint a Director each, on the occasion of the biennial elections of Executive Directors. Usually these countries are among the five with the largest quotas, but Canada appointed a Director under this provision for the two years beginning November 1958.

The remaining Directors are elected for two-year terms by the other members. Three seats are specifically reserved for the Latin American Republics. The other members arrange themselves informally into groups. For example, the five Nordic countries customarily form a single group. Some members are, however, represented by an Executive Director from a country which is not geographically close. For example, at the end of 1965 eight Middle Eastern countries were represented by Mr. Saad (from the United Arab Republic), but Mr. Saad also represented Afghanistan, Ethiopia, Pakistan, Somalia, and the Philippines; Mr. Lieftinck (a Dutch national) cast the votes of Cyprus, Israel, the Netherlands, and Yugoslavia; and Mr. van Campenhout (from Belgium) those of Austria, Belgium, Korea, Luxembourg, and Turkey. The groupings of countries that combine to elect Directors have changed little since 1954.

Voting in the Fund is not conducted, as in most other international organizations, on the basis of one country, one vote. The system in the Fund is one of weighted voting, that is, the voting strength wielded by each member’s representative is based on the quotas of the members (or quota of the member) which he represents. The intent is to give the greatest “say” to those countries which have contributed the most to the Fund’s assets.

On April 30, 1966, the U.S. Director had 23.82 per cent of the total voting power in the Fund, the British Director 11.33 per cent, the Directors from France and Germany 3.73 per cent each, and the Indian Director 3.56 per cent. With the steady increase in the number of members and the disproportionate increases in many quotas in 1959–60, these percentages were somewhat smaller than when the Fund was first established. The voting power of the elected Directors in April 1966 ranged from 5.53 per cent of the total (Mr. Saad) to 1.89 per cent.

Some of the Directors have served for long periods of time. Among appointed Directors, for example, Mr. de Largentaye was the French Director from June 1946 until June 1964 and Mr. Southard represented the United States from March 1949 to October 1962 (the United States has had only four Directors since 1946). Among elected Directors, Mr. Saad has been a Director since the establishment of the Fund; Mr. Rasminsky (Canada) served from 1946 to 1962; Mr. Lieftinck has been on the Board since 1955, Mr. Tann (China) since 1950, and Mr. van Campenhout since 1954. Other groups, for example, the Nordic countries and sometimes the countries of Central America, vary the countries from which their Directors are elected.

Usually the Directors are experts in international monetary affairs. Most of them have been officials of treasuries, ministries of economics, or central banks; a number have been former Ministers of Finance or Governors of central banks. Many are highly qualified economists; some have already been on the senior staff of the Fund and some have been appointed later to senior staff posts.

The Executive Board functions in continuous session, meeting as often as Fund business requires. Through the Executive Directors, members exercise a closer control over the day-to-day activities of the Fund than is generally the case with international organizations, with one or two exceptions such as the Organization for Economic Cooperation and Development (OECD).

A few countries formerly made it a practice to appoint as Executive Director a high official whose main work was at home, and who visited Washington on Fund business only at irregular intervals. But nowadays the Directors usually devote full time to their Fund duties. Some also represent their countries on the Executive Board of the World Bank, or combine with their work as a Director of the Fund other duties in Washington on behalf of their governments. Mondays, Wednesdays, and Fridays are reserved for meetings of the Fund Board; this permits Executive Directors who also serve on the Board of the Bank to attend its meetings on Tuesdays and Thursdays. When business demands it, meetings are also held on holidays and on week-ends.

Each Executive Director appoints an Alternate from the country or countries which appointed or elected him. Some of the elected Directors appoint Alternates from member states other than those from which they themselves come. The presence of Alternates in Washington makes it possible to maintain the principle of continuous session for the Board, even though some Executive Directors may not themselves be continuously available. A member not entitled to appoint an Executive Director may send a special representative to an Executive Board meeting when a matter particularly affecting the member is under consideration. The representative may speak at meetings but may not vote.

With a few exceptions, such as a change in quota, a simple majority of votes cast is all that is necessary to carry a decision. But some actions—for instance, changes in quotas or in par values—must have the concurrence of the member concerned as well.

In practice, nearly all decisions of the Executive Board are taken without a vote. Down to the end of 1965, only 45 recorded votes were taken; of these, many were purely a matter of form, relating to changes in the Fund’s schedule of charges, for which a three-fourths majority of the Directors is required by the Articles. Several more of the 45 recorded votes dealt with administrative and personnel matters. Since 1953 votes on substantive issues have occurred only infrequently. Apart from the approval of changes in the schedule of Fund charges, there was, between 1953 and the end of 1965, only one issue on which a vote was taken. Instead, the Chairman of the Board customarily obtains what is agreed to be the sense of the meeting. These words were explicitly defined by the Directors in 1947 to be a position supported by those Directors having sufficient votes to carry the question if a vote were to be taken.

One other special attribute of the Executive Board should be noted—the responsibility for interpreting the Articles of Agreement. Indeed, the Articles give the Executive Directors the power to interpret questions relating to the range and limits of their own authority.4

Managing Director

The Managing Director is Chairman of the Executive Board as well as chief of the international staff. He is appointed by the Board for a five-year term. He presides over meetings of the Board but has no vote. He is also in charge of the organization, appointment, and dismissal of the staff, and is responsible for the work of the staff and for the formulation of staff positions on policy matters.

The Managing Director is the principal representative of the Fund; for example, he addresses the Board of Governors at Annual Meetings, and gives formal statements on behalf of the Fund to other high-level international gatherings. When the Fund is invited to meetings at the ministerial level, it is the Managing Director who attends.

The Fund has been under the leadership of four Managing Directors: Camille Gutt, from Belgium (May 1946–May 1951); Ivar Rooth, from Sweden (August 1951–October 1956); Per Jacobsson, also from Sweden (November 1956–May 1963); and Pierre-Paul Schweitzer, from France (September 1963 to the present). Each has been well known in the fields of money, banking, and finance. Mr. Gutt had been Minister of Finance in Belgium; Mr. Rooth, Governor of the Sveriges Riksbank; Mr. Jacobsson, Economic Adviser and Head of the Monetary and Economic Department of the Bank for International Settlements; and Mr. Schweitzer, Deputy Governor of the Bank of France.

Since 1949 there has also been a Deputy Managing Director. So far three persons, all from the United States, have served in this capacity: Andrew N. Overby (February 1949-January 1952); H. Merle Cochran (March 1953-October 1962); and Frank A. Southard, Jr. (November 1962 to the present). The Deputy Managing Director assists the Managing Director and, in his absence, chairs the meetings of the Executive Board and directs the staff.


The Fund is relatively small as organizations go these days: on April 30, 1966, the staff consisted of 750 persons in total. About half were professional staff—economists, lawyers, statisticians, and fiscal experts—drawn from 69 member countries. The staff is selected with a view to securing the highest standards of efficiency and technical competence, with due regard to the importance of having as wide a geographical basis as possible. Because it has often been difficult to recruit from the less developed countries staff members who have the necessary qualifications and who can be spared from duties in their home countries for several years, a high proportion of the staff—especially of the senior staff—has come from the United States, the United Kingdom, other European countries, Canada, and Australia. However, many of the less developed countries have also been represented on the senior staff; in 1965, for example, senior staff officers included persons from Burma, Chile, Ghana, India, Pakistan, and Paraguay. Senior staff appointments are subject to the approval of the Executive Directors, who also pass on the annual administrative budget.

Members of the staff owe their duty entirely to the Fund; each staff member is, on appointment, required to sign a statement that he will accept no instruction from any country. The majority of staff members stay with the Fund for long periods; most of the senior staff, in April 1966, had been with the Fund for close to fifteen years, and many for twenty years. Hence, over time, the Fund’s staff has become part of an international civil servant group, similar to staff serving in other international organizations, such as the United Nations, the World Bank, the GATT, and the FAO.

The staff at the end of 1965 was organized into fourteen departments-five functional departments (Exchange and Trade Relations, Fiscal Affairs, Legal, Research and Statistics, and Treasurer’s) and five area departments (African, Asian, European, Middle Eastern, and Western Hemisphere). Two departments (the Central Banking Service and the IMF Institute) were devoted to technical assistance and training, and in addition there was an Administration Department, for internal administration, and a Secretary’s Department, to provide services to the Executive Directors and to Governors. In addition to the headquarters in Washington, there were small offices in Paris and Geneva.


As early as the Inaugural Meeting in Savannah in 1946, a distinction was made between the roles of the Executive Directors on the one hand and of the Managing Director and the staff on the other: the Executive Directors are responsible to the countries that appointed or elected them; the Managing Director and the staff to the Fund as a whole. This division of responsibility has persisted, although, over time, the implementation has changed substantially.

In the Fund’s first two years, Executive Directors headed field missions to member countries, frequently accompanied by senior staff. In 1948, after the Board took a decision clarifying the division of responsibility, Directors ceased as a rule to head such missions, and these were now headed by members of the staff. Mr. Saad (Egypt) continued until 1955 to act as head of the Fund’s missions to the meetings of the GATT, but since then the Fund has been represented at international meetings by members of the staff, or, on occasion, by the Managing Director or Deputy Managing Director.

From 1948 until well into the 1950’s, the composition of each staff mission was subject to Board approval, and the Board outlined detailed instructions for them. Sometimes the Board would pass a general decision outlining the Fund’s official position; at other times Board meetings were held so that, prior to the staff’s departure, Directors could indicate their points of view on a particular topic. Several instances of this process can be noted in the forthcoming chapters.

There was also a tendency for member governments, before submitting a formal proposal or request to the Fund, to ask their Executive Directors to discuss it with other Directors first. Quite frequently the Executive Director for the member concerned went to the Director of the United States—the country with the largest quota. If the U.S. Director concurred with the proposal or request, the member would then continue with the formal procedures of the Fund. It was in this sense that some observers commented that the United States “dominated” the Fund. By 1952 this practice had begun to wane and by 1956 it had virtually ended.

What emerged by the late 1950’s and early 1960’s, and has continued, is a process in which the five instruments of policymaking are closely interwoven, but in which the management and the staff have a large measure of responsibility. There were several reasons for the change. Increasing contacts between individual members of the staff and individual Directors, frequently on a first-name basis, both enabled the staff to convey informally to the Directors suggestions for the improved operation of the Fund and gave Directors greater confidence in the staff. As the staff conducted missions and technical assistance to member countries, it had to make on-the-spot decisions, subject only later to Board review and confirmation. As missions became more frequent, and a regular part of the Fund’s procedures, members themselves were inclined to place more confidence in the staff. In addition, members became less concerned that the presence of a staff mission would be interpreted by the press or outsiders as a sign of pending exchange devaluation: the extreme secrecy which had attended missions could be dispensed with. Henceforth, representatives of member governments and the Fund staff could have more open contacts and exploratory discussions that did not commit the Board.

The public speeches commenting on countries’ domestic policies made by Mr. Jacobsson during his tenure gave separate and important identity to the Managing Director. Furthermore, as the membership grew, the Board grew, and the new Directors did not have the accumulated experience of their predecessors. Meanwhile, the staff was gaining experience, especially as senior staff stayed on in the service of the Fund. As the same staff representatives returned time and again to member countries, the staff developed insight into the problems of members and an intimate acquaintance with their officials; indeed, several members of the staff, in the course of providing technical assistance to the member, have resided for long periods in a country.

Now as the Fund’s policies are gradually worked out, an almost continuous interchange of ideas, both formally and informally, takes place between the members, the Governors, the Executive Directors, the Managing Director, and the staff. The nature of this interchange is somewhat different for policies pertaining to individual member countries and for general policies.


Day-to-day work

In the day-to-day operations of the Fund, the procedure is almost the inverse of the formal line of authority described above. Preparatory work is done by the staff, whose appraisal and recommendations are approved by the Managing Director; and the agreed staff position is then reviewed and decided upon by the Executive Directors. Only after decision by the Board do proposals become official Fund policy. Later action is taken by the Governors, if required, and then, if need be, by the members. As noted above, the Governors must approve quota changes and applications for membership. They have also passed several resolutions requesting the staff and the Executive Board to look into broad general policy questions facing the Fund. Action at the member level is also necessary for certain procedural changes, as, for example, the ratification of amendments to the Articles by the legislatures of member governments.

The primary responsibilities of the staff are to keep abreast of developments in member countries, especially of those financial and monetary developments directly pertinent to the Fund’s interests; to carry out the Fund’s policies vis-à-vis members; and to handle negotiations with members. The staff examines a regular inflow of documentary and statistical material from member countries. But in addition, both junior and senior staff make frequent visits to the member countries to gather data, to confer with technicians, to evaluate economic trends, and to conduct discussions with the authorities concerning the member’s monetary and financial policies, as part of the policy of annual consultation with members. (The evolution of these consultations and the way in which they are conducted forms the subject of Chapter 11.)

As a result, the staff is often engaged not only in becoming familiar with members’ economies, but in assisting them to work out monetary and financial policies. For example, if a member is trying to stabilize its economy, the staff may help the government team to formulate monetary and credit measures, or budget and tax policies, or both. If the country wishes to relax restrictions on international payments or to move to an alternative exchange rate, the staff may help to analyze the impact of these actions and to judge the need and nature of supporting measures. Not infrequently, high-ranking officials of member countries, at an early stage in their deliberations on new monetary and financial policies, explore informally the likely reactions of the Fund management and staff.

Most of the work with the countries is carried on by the area departments. But functional departments also perform specialized day-to-day work that helps to shape the Fund’s policies vis-à-vis individual countries. The Exchange and Trade Relations Department, for example, analyzes developments in members’ restrictive systems. The Fiscal Affairs Department concerns itself with tax and budgetary problems. The Research and Statistics Department has, among its other duties, the making of calculations and projections for the operation of the compensatory financing facility, and the important job of collecting from members the basic financial, monetary, and balance of payments statistics essential for assessing the nature and magnitude of a member’s problems. The Treasurer’s Department undertakes the Fund’s financial operations, including drawings, repurchases, and charges, and is responsible also for quotas and calculations of monetary reserves. The Legal Department ensures that the Fund and its members are fulfilling their obligations under the Articles of Agreement. The Central Banking Service provides advice and technical assistance on the setting up and operating of central banks, especially in less developed countries. The Joint Library, to provide the basic source materials needed by both the Fund and the Bank, is continuously adding to its collection of documents, reports, books, and periodicals in more than thirty languages. Indeed, there is virtually no staff member whose work is not in some way or another pertinent to the Fund’s dealings with its member countries.

Generally, an attempt is made to avoid having a staff member negotiate with his own country. The availability of staff from the functional departments makes this task easier, while at the same time giving the member countries the benefit of the specialized experience of the staff of functional departments and keeping this staff informed on the current problems of members.

In carrying on these functions, the staff has close discussions, which take place before field missions as well as immediately thereafter, with the Managing Director and his Deputy. Senior staff officials from various departments are also frequently involved in these discussions, as part of many informal interdepartmental meetings between staff and management.

Staff recommendations

Upon return from a mission, the staff team reports directly, within forty-eight hours, to the Managing Director and the Deputy Managing Director. Should any issues need to be resolved, meetings of the staff team and senior staff officers are called by the Managing Director. The staff team then prepares a detailed report of its activities and discussions with the member, and drafts recommendations for action by the Fund. This report is considered by an informal interdepartmental committee, which includes at least some of the members of the mission. In any case, the reviewing committee includes members of the relevant area department, the Exchange and Trade Relations Department, and the Legal Department.

In formulating an agreed position, the staff is guided by previous decisions taken by the Executive Directors. As time has gone on, and general guidelines have emerged delimiting what the Board will or will not approve, the staff has been able to work informally with member countries in drafting programs and requests that are likely to be acceptable to the Board. As a result, for example, no request for a drawing which reached the Board for several years before 1965 was rejected, although a considerable number of requests which members would have liked to make were not made because the staff advised them that the attendant circumstances were not in line with the Fund’s policy.

The Managing Director, in his continuous contacts with the Executive Directors, may well have explored informally with the Director of the country concerned his reactions to the staff’s appraisal and recommendations. In some instances, the Executive Director may even have attended, as an observer, the discussions in the member country between the staff and the member’s representatives.

Board decisions

Once a staff report has been written and approved and an agreed staff and management position has been formulated, the subject is ready for the agenda of the Board of Executive Directors. Although any Director may propose items for the agenda, usually it is determined by the Managing Director after informal consultation with individual Directors.

The meetings on the topics on the agenda are formal ones, of which detailed minutes are kept. In discussions concerning a particular country, the Director appointed or elected by that country customarily speaks first, presenting his (or the government’s) views of the staff’s evaluation and recommendations and any additional explanations and comments he wishes. Comments by virtually all of the Directors on most topics are common. The positions taken by an appointed Director naturally reflect closely those of his government. He keeps his government more or less continuously informed about the Fund’s deliberations and receives appropriate instructions, although he may also have participated within his government in the formulation of those instructions. An elected Director, too, does his best to accommodate the views and suggestions of all his constituents, including the one which nominated him. In fact, placing an important item on the agenda may be delayed for a while if a Director does not receive instructions from his home country. Usually, too, the Managing Director attempts to iron out important controversies between Directors prior to placing an item on the agenda.5

Although in the first few years of the Board’s deliberations, many Directors were concerned primarily with safeguarding the legal rights of their members against the Fund’s overstepping its bounds, or with preventing the Fund from jeopardizing the vested financial interests of members, an international viewpoint quite rapidly evolved. Directors soon began to express points of view that took into account the interests of all members or of the Fund as a whole. The changes in the process of policymaking just described were also part of the process by which the Fund became more truly international, with members gradually submerging many of their conflicting national interests.6 Frequently Directors speak as technical experts on a particular problem on which they have expertise.

Staff members concerned with a particular country or a general topic are present at Board meetings. Senior staff members explain and defend the staff position, and answer specific questions raised by the Directors. Even if a Director disagrees with a staff appraisal or recommendation, he usually values an independent staff position. Directors often make minor changes in the wording of draft stand-by arrangements or draft conclusions to consultations. Discussion of items in which there is little interest or controversy may last for only a few minutes; discussions of other items may go on for two or three hours—the usual length of a meeting—or even be extended to two or three sessions.

Final decisions of the Board are drafted with great care. Terms which might adversely affect the prestige or domestic affairs of a member are avoided. Recommendations for action are couched in phrases which carefully reflect the limits of the Fund’s authority. Efforts are made to incorporate the points of view of as many Directors as possible, consistent with a meaningful decision. Once a decision is taken by the Board, it becomes the decision of the Board as a whole. No publicity is given to the dissenting view of individual Directors.

Decisions on individual countries are communicated to the members by the Managing Director. Some, such as recommendations concerning changes in quotas or membership resolutions, require action by the Board of Governors. The precise language submitted to the Governors for consideration is drafted by the staff and approved by the Board of Executive Directors before being taken to the Governors. The relations between the Governors and Executive Directors make it unlikely that the Governors will vote differently from the Directors; only rarely, and not since 1951, have Governors even made statements critical of Directors.

To complete the policymaking circle, after decisions have been taken by the Executive Board or resolutions have been adopted by the Board of Governors, the staff has the responsibility for carrying out these instructions in its day-today work with the member countries.

There are several advantages to these procedures. First, efficient use is made of the staff. A field mission is competent to deal with a wide range of topics and is treated by the member country as a negotiating team. Also, a minimum amount of time is involved in eliciting and reconciling the views of the staff, so that an agreed staff position can be formulated. Thus, the Fund’s operations with over a hundred member countries have been handled by a relatively small staff. Second, Fund actions, such as drawings or exchange rate changes, can be taken quickly. Close acquaintance with the problems of members means that staff position papers can be prepared at short notice. The fact that the Executive Board is in continuous session, meeting as the occasion requires; the periodic review by the Board of member countries’ economic situations; and the rapid preparation by the staff of papers to be considered, together make possible the taking of decisions by the Fund very promptly.


In the formation of the general policies of the Fund on such subjects as restrictions, exchange rates, changes in quotas, and use of resources, the procedures differ somewhat from those followed in respect of individual countries. An issue may arise in the course of Executive Board discussions, which is then pursued by an ad hoc committee of officials from the departments immediately concerned. Or an issue may arise during the course of a discussion by senior staff of some other problem. The small group of senior officials which first explores a general problem usually consists of the Managing Director, the Deputy Managing Director, the General Counsel (the head of the Legal Department), the Economic Counsellor (the head of the Research Department), and, depending on the issue at hand, possibly the Directors of the Exchange and Trade Relations Department, the Fiscal Affairs Department, the Treasurer’s Department, and some of the area departments. Then if, after discussion, the group decides that further study is desirable, the topic is assigned to one of the departments, usually a functional department, or an interdepartmental working group. There is then intensive study by the staff, and general analytical papers are circulated to the Board, for information only. The possibilities of compensatory financing through the Fund were, for example, exhaustively investigated by the staff for two years prior to the Board’s decision.

The Executive Directors frequently hold preliminary meetings to explore a general issue and possible alternative policies. The technique of informal sessions of the Board was introduced in January 1950, when the Board adopted a proposal by Mr. Southard (United States) that it meet from time to time to discuss multiple currency policy. The purpose of informal sessions is to allow Directors to express their views without necessarily committing the countries which they represent. Minutes are not circulated, though an unofficial record is kept in the Secretary’s Office for reference. The discussions are purely between the management, the Directors, and the senior staff. The Managing Director, meanwhile, may be exploring with various Governors their reactions and views, including discussions in meetings of the Group of Ten (see below). Only after a considerable sorting out of ideas and views has taken place, and virtual agreement by the Governors has been assured, are proposals considered formally by the Board of Executive Directors.

Here, again, the process of formulating general policy differs significantly from the process in the Fund’s early days. In 1947, for example, examination of the major policy problem facing the Fund—what action to take concerning multiple exchange rates—had been undertaken by an Ad Hoc Committee of Executive Directors, and it had been that committee which made policy proposals to the Board.


What has come to be known as the Group of Ten is not part of the structure of the Fund; however, because of the close relations involved, a few words about the nature of this group are appropriate. In October 1962 the General Arrangements to Borrow came into effect. Under these Arrangements, ten major industrial countries—Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom, and the United States—agreed to stand ready to lend their currencies to the Fund up to specified amounts when the Fund and these countries considered that supplementary resources were needed by the Fund to forestall or cope with an impairment of the international monetary system. The total of the supplementary resources made available was equivalent to $6 billion. On October 15, 1965, the Executive Directors approved a four-year renewal of these Arrangements for the period October 1966-October 1970.

The Ministers of Finance and Governors of central banks of the ten countries concerned have met on several occasions to discuss major international monetary and financial problems of mutual interest. The Managing Director has been invited to attend these meetings. Deputies of the Group of Ten meet at the official level; senior staff members of the Fund participate in these meetings. In addition, shortly after the end of the period covered by this volume, in 1966–67, four joint meetings were held between the Executive Directors and the Deputies of the Group of Ten.


Switzerland does, however, have an agreement with the Fund parallel to the Fund’s General Arrangements to Borrow.


The membership at the end of 1965 and the date that each member joined are listed in Table 2 of Chapter 4 (below, pp. 87–89).


For a list of the Executive Directors and their Alternates from the Fund’s inception to the end of 1968, see above, Vol. I, Appendix A.


On the significance of this feature, see Chapter 25 below and Joseph Gold, Interpretation by the Fund, IMF Pamphlet Series, No. 11. For an earlier study, see Ervin P. Hexner, “Interpretation by Public International Organizations of their Basic Instruments,” American Journal of International Law, Vol. 53 (1959), pp. 341–70.


Further details on the functioning of the Executive Board can be found in articles by two former members of the Fund staff: Allan G. B. Fisher, “The Political Framework of an International Institution,” The Manchester School, Vol. XXX (May 1962), pp. 121–51; and Ervin P. Hexner, “The Executive Board of the International Monetary Fund: A Decision-Making Instrument,” International Organization, Vol. XVIII (1964), pp. 74–96.


See below, pp. 31–33.

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