The IMF is governed by a Board of Governors, an Executive Board, and a Managing Director supported by three Deputy Managing Directors. Two advisory bodies, the International Monetary and Financial Committee and the Development Committee, provide a bridge between the Board of Governors and the Executive Board.130

The IMF is governed by a Board of Governors, an Executive Board, and a Managing Director supported by three Deputy Managing Directors. Two advisory bodies, the International Monetary and Financial Committee and the Development Committee, provide a bridge between the Board of Governors and the Executive Board.130

Board of Governors

The Board of Governors is the highest decision-making body of the IMF.131 The Board of Governors consists of one Governor for each of the 185 member countries of the IMF and one Alternate. They are usually ministers of finance or governors of central banks. They do not serve fixed terms, but hold their positions until successors are appointed. The Board selects one of the Governors as Chair.

The Board of Governors has delegated most of its authority to the Executive Board for its day-to-day operations. However, it has retained several important powers, including that to admit and suspend member countries, to increase or decrease the authorized quotas or shareholdings of the IMF, or to amend the Articles of Agreement of the IMF. The Board of Governors also endorses the IMF’s budget and financial statements.

The Board of Governors meets annually, usually in a joint session with its counterpart in the World Bank, and usually in September or October. Special meetings of the Board of Governors may be called whenever requested by fifteen members or by members having one-quarter of the total voting power, but this has never been done to date. A quorum for any meeting is a majority of Governors having not less than two-thirds of the total voting power. Since 1953, two consecutive Annual Meetings are held in Washington, D.C., USA, and every third meeting is held in a member country other than the United States. Procedures also exist for the Board of Governors to take a vote on a specific question without calling a meeting.

International Monetary and Financial Committee

A Committee on Reform of the International Monetary System and Related Matters (The Committee of Twenty) was established in 1972 to study various aspects of the international monetary system after the collapse of the Bretton Woods par value system in 1971. The Committee recommended the creation of a permanent Council with appropriate powers. The Council would supervise the management and adaptation of the international monetary system, including the continuing operation of the adjustment process and developments in global liquidity, and in this connection would review developments in the transfer of real resources to developing countries.132 Pending the establishment of the Council, an Interim Committee of the Board of Governors on the International Monetary System was established in October 1974 and the Committee of Twenty was dissolved.

The Interim Committee had a composition similar to that proposed for the Council; but the Interim Committee was an advisory body, whereas the Council would be a decision-making body. The Second Amendment of the Articles of Agreement in 1978 made provision for a Council to be established by an 85 percent majority decision of the Board of Governors; however, to date the Council has not been established. In September 1999, the Board of Governors strengthened and transformed the Interim Committee into the International Monetary and Financial Committee (IMFC), to enhance the effectiveness of member oversight of the IMF at the political level.133

The IMFC remains an advisory body. It advises, and reports to, the Board of Governors on matters pertaining to:

  • The management and adaptation of the international monetary and financial system, including the continuing operation of the adjustment process, and developments in global liquidity and the transfer of real resources to developing countries.

  • Proposals by the Executive Board to amend the Articles of Agreement.

  • Sudden disturbances that might threaten the international monetary and financial system.

  • Ad hoc requests by the Board of Governors.

IMFC members are governors of the IMF, Ministers, or others of comparable rank. Each member of the IMF that appoints an Executive Director, and each member or group of members that elects an Executive Director, is entitled to appoint one member of the IMFC and up to seven associates. Thus the IMFC has the same number of members and the same constituency groupings as the Executive Board of the IMF, although the IMFC member is not always from the same country as the Executive Director.

In practice, the IMFC selects a Chair from among its members, who serves for such period as the IMFC determines. Members of the IMFC, their associates, and Executive Directors or their alternates are entitled to attend the meetings of the IMFC, unless the IMFC decides to hold a more restricted session. In addition, the Managing Director participates in all IMFC meetings, and may be accompanied by up to two staff unless the session is a restricted one. The Secretary of the IMF serves as the Secretary of the IMFC. The IMFC may invite observers to attend its meetings.

The IMFC ordinarily meets twice a year, in April and at the time of the Annual Meetings of the Board of Governors, but ad hoc meetings may be requested at any time by any member of the Committee. In addition, in September 1999 the Board of Governors decided that meetings of the IMFC will normally be preceded by a preparatory meeting of “Deputies,” or representatives of IMFC members. The IMFC Chair calls meetings of Deputies in consultation with other IMFC members.

The IMFC issues a communiqué after each meeting summarizing the outcome of its discussions and giving strategic direction to the IMF’s policy work for the near to medium term. On the basis of the communiqué, the Managing Director draws up a work program for the IMF for the coming 6-12 months. After discussion by the Executive Board, and amended as necessary, the work program forms the basis for the Board’s work and calendar of meetings in the period ahead. An interactive relationship exists between the deliberations of the IMFC and the work of the Executive Board, in which the IMFC sets every six months the strategic direction going forward based on a thorough review of the progress made by the Executive Board in executing its work program during the preceding period.

Development Committee

The Committee of Twenty also recommended the establishment of a joint ministerial committee of the Boards of Governors of the IMF and the International Bank for Reconstruction and Development to carry forward the study of the broad question of the transfer of real resources to developing countries. Based on this recommendation, in October 1974 the Boards of Governors of the IMF and the World Bank established the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries, called the Development Committee, to advise both Boards on development issues.

The Development Committee:

  • Maintains an overview of the development process, giving urgent attention to the problems of least developed countries and those developing countries most seriously affected by balance of payments difficulties.

  • Advises and reports to the Boards of Governors of the World Bank and the IMF on all aspects of the transfer of real resources to developing countries in relation to existing or prospective arrangements among countries, including those involving international trade and payments, the flow of capital, investment, and official development assistance.

  • Makes suggestions regarding the implementation of its conclusions, and reviews, on a continuing basis, the progress made in implementing these suggestions.

Members of the Development Committee are governors of the World Bank, governors of the IMF, Ministers, or others of comparable rank. They are appointed in turn for successive periods of two years by members of the Bank and members of the IMF. Each member of the World Bank or the IMF that appoints or elects an Executive Director and each group of members of the World Bank or the IMF that elects an Executive Director is entitled to appoint one member of the Development Committee and up to seven associates. The Committee selects one of its members as Chair and appoints an Executive Secretary.

The Development Committee reports not less than once a year to the Boards of Governors of the IMF and the World Bank. It meets at the time of the annual meetings of the Boards of Governors, and, in addition, as often as required. In practice, the Committee normally meets twice a year, at the same time and location as the IMFC. The President of the World Bank and the Managing Director of the IMF participate in all meetings of the Development Committee, thus ensuring coordination of the work of the Development Committee with the work of the Executive Boards of the IMF and the Bank. The Development Committee issues a communiqué at the end of its meetings.

Executive Board

The Executive Board, under the chairmanship of the Managing Director, conducts the day-to-day business of the IMF through powers delegated to it by the Board of Governors.134 It is the policy-making organ of the IMF, and is responsible for the approval of all IMF lending operations.

Size and Composition

The Executive Board currently comprises 24 Executive Directors, each of whom appoints an Alternate with full power to act for him/her when he/she is not present (see Appendix). Five Executive Directors are appointed by the five member countries having the largest quotas—currently the United States, Japan, Germany, the United Kingdom, and France—and serve at the discretion of the appointing member. The remaining 19 Executive Directors are elected by the rest of the membership (180 member countries) and serve for renewable two-year terms. Elections are normally held at the time of the annual meetings of the Board of Governors, in even-numbered years, but by-elections are held when needed.

From among the 180 member countries that elect 19 Executive Directors, Saudi Arabia, China, and Russia, by virtue of the size of their capital subscriptions to the IMF, are able on their own to elect an Executive Director. The remaining 177 member countries are organized into 16 multi-country constituencies to elect the remaining 16 Directors on the Board. Members decide among themselves which constituency to join, and vote for an Executive Director to represent the constituency. Geographical considerations have generally been important in the formation of constituencies, but some constituencies include both industrial and developing countries or members from different regions. In some constituencies the Executive Director is selected from the country with the largest voting power, while in others the post is rotated. Normally the Alternate Executive Director in multi-country constituencies is of a different nationality from the Director.

At the time of each election, the Board of Governors, by an 85 percent majority vote, may decide to increase or decrease the number of elected Directors. Furthermore, if, at the time of each election, the members entitled to appoint an Executive Director do not include the two members whose currency had been the most used in IMF transactions during the preceding two years, then these two members become entitled to appoint an Executive Director—and the number of elected Executive Directors may be reduced accordingly, unless the Board of Governors, by an 85 percent majority, decides not to do so because a reduction would hinder the effective discharge of the functions of the Executive Board or of Executive Directors or would threaten to upset a desirable balance in the Executive Board.

The custom of the Executive Board has been to have its most senior member serve as the Dean. The Dean fulfills functions such as addressing the Board when a formal occasion calls for a spokesman of the Executive Board. However, the Dean never speaks for the Executive Board on policy matters.135

Board Procedures

Executive Directors are stationed full-time at the IMF’s headquarters in Washington, D.C., and the Executive Board functions in continuous session—it meets as often as IMF business dictates. Usually meetings are held three times a week. Any Executive Director can request a meeting on any matter. The Chair normally notifies the Executive Board of meetings at least two business days in advance, and prepares the agenda for each meeting. A quorum exists when a majority of Executive Directors having not less than 50 percent of the total voting power is present, but the practice is for all chairs to be occupied at all times, either by the Director, Alternate Director, or a designated Temporary Alternate Director.

The Executive Board meets in ordinary or executive sessions. Most meetings are in ordinary sessions, and ordinary meetings may be formal or informal. Board decisions are taken only in formal sessions. Informal sessions are a forum for an open exchange of views on issues that are not yet at the stage at which a formal decision can be taken. They are often an occasion for the Board to be briefed by management and the staff on sensitive country developments, or to provide preliminary views on important policy matters or program discussions. Informal sessions are not subject to the minimum advance notice required of formal Board meetings, and may be called on very short notice. Ordinary meetings are open to attendance by members of the offices of Executive Directors, the Secretary, and such other members of staff as the Chair may determine.136

Executive sessions are held whenever the Managing Director or any Executive Director so desires. Attendance at executive sessions is limited to Executive Directors, the Managing Director, and the Deputy Managing Directors, except that for any particular session the Executive Board may permit other specified individuals to attend, such as the Secretary.

The starting point of a formal Executive Board meeting on any matter is generally one or more Board papers prepared by the staff and approved by the Managing Director or a Deputy Managing Director. These papers contain Management’s and the staff’s analysis and recommendations on the subject, and are issued to the Executive Board two to three weeks in advance of a Board meeting to give Executive Directors sufficient time to consult with their authorities and prepare an adequate response. There is usually no documentation for informal Board meetings—mostly a summary table or two issued just prior to the meeting.

Executive Directors express their views in written statements issued prior to the Board meeting or in oral statements during the meeting. The written statements, called “gray statements” or “grays,” are preliminary and may be modified by Executive Directors after they are issued. Executive Directors are not subject to formal length or time constraints on their statements, though there are guidelines for effective and efficient interventions in the case of Article IV surveillance discussions.137 They may intervene at any point during the meeting to ask questions and make comments, and discussions are frequently of an interactive nature.

Typically the Board spends about two-thirds of its time on member country surveillance and program matters. Most of its remaining time is spent on policy issues concerning the international monetary system and the world economy. In addition, there are administrative issues, such as the budget. Several Board committees have been set up, each overseeing a particular subject matter. However, the Executive Board conducts the bulk of its work in the formal sessions of the Board, not through Committees. Executive Directors may travel frequently, especially to participate in policy discussions between IMF staff and member countries.

Board Committees

The Board maintains a number of standing committees that include Executive Directors. These committees are reconstituted every 2 years following the regular election of Directors and on the basis of proposals by the Managing Director. Membership in the committees should provide a reasonable distribution of workload, continuity, and geographical balance. There are also some formal requirements for some committees concerning the number of members. Other Executive Directors may participate in all regular meetings of these committees. There are currently 10 standing committees, the functions of which are described below.

  • Agenda and Procedures Committee. Contributes to the development and smooth implementation of the Executive Board’s work program.

  • Committee on the Annual Report. Reviews and makes recommendations to the Board on the format and content of the IMF’s Annual Report in line with the provisions of the Articles of Agreement and By-Laws, as well as with the IMF’s commitment to transparency and its role in the international monetary system.

  • Committee on the Budget. Considers from a broad perspective the Managing Director’s budget proposals and other material circulated by the Managing Director regarding the IMF’s administrative and capital budgets.

  • Committee on Executive Board Administrative Matters. Considers and reports to the Executive Board on aspects of administrative policy regarding those employed in Executive Directors’ offices.

  • Committee on Interpretation. Considers and makes reports and recommendations to the Executive Board on questions of interpretation. Legal questions are sent to the Committee by the Executive Board at the request of an Executive Director.

  • Evaluation Committee. Follows closely the evaluation function in the IMF and advises the Executive Board on matters relating to evaluations.

  • Pension Committee. Decides matters of a general policy nature arising under the Staff Retirement Plan.

  • Ethics Committee. Considers matters relating to the Code of Conduct for IMF staff and may also provide guidance to Executive Directors, at their request, on ethical aspects of the conduct of their staff.

Executive Directors hold the chairmanship of all but the two committees on budget, and pensions, which are chaired by the Managing Director. The Secretary of the IMF or his or her representative serves as the Secretary of every committee except the Ethics Committee.

Voting and Consensus Decision-Making

The Executive Board’s formal voting and decision-making system is described in Box 9.1. In practice, however, the Executive Board rarely takes a formal vote. Instead, because the IMF is a cooperative institution, the Executive Board seeks to work by consensus. Rule C-10 of the By Laws, Rules, and Regulations stipulates that “The Chairman shall ordinarily ascertain the sense of the meeting in lieu of a formal vote.” Any Executive Director may request that a formal vote be taken; however, this rarely happens. The “sense of the meeting” is a position supported by Executive Directors having sufficient votes to adopt that position if a vote were taken.

The IMF’s Voting System1

Voting Power of Individual Members and Constituencies

Voting in the IMF is weighted by the relative sizes of members’ quotas. Article XII, Section 5 (a) of the IMF’s Articles of Agreement stipulates that “Each member shall have two hundred fifty votes plus one additional vote for each part of its quota equivalent to one hundred thousand special drawing rights.” Based on this formula, and on quotas prevailing as of November 2006, the distribution of voting power among individual members of the IMF and among constituency groupings as of November 2006 is shown in the Appendix.

The IMF’s voting system distributes voting power largely on the basis of members’ relative contributions to the IMF’s resources. The “basic” votes—the 250 votes assigned to each member independent of quota—have a small equalizing effect on the distribution of voting power, offsetting slightly the impact of quotas, and hence benefit the members of the IMF with smaller quotas. Thus, the share of total voting power of these members slightly exceeds their share of total quota, and the opposite is true in the case of members with larger quotas. However, the number of basic votes per member has remained unchanged since inception, while members’ quotas have increased. As a result, the share of basic votes in total votes has fallen from 15.6 percent in 1958 to 2.1 percent since 1998, which has increased the dominance of quotas in determining relative voting strength at the IMF.

Voting Majorities

Under the IMF’s Articles of Agreement, most Executive Board decisions are made by a majority of the votes cast. However, a number of decisions require special majorities of 70 percent or 85 percent of the total voting power.2 A 70 percent majority is required to resolve financial and operational issues such as the rate of charge on the use of the IMF’s resources and the rate of interest on SDR holdings. An 85 percent majority is required for the most important decisions, such as admission of new members, increases in quotas, allocations of Special Drawing Rights, and amendments to the Articles of Agreement. Given the voting structure, the United States alone, the European Union, or groups of other constituencies voting as a bloc can veto decisions requiring an 85 percent majority.

In multi-country constituencies, where differences of views may exist among constituents on matters before the Board, Executive Directors may present these differences of views to the Board for the record; however, in the event of a vote on any matter, the Executive Director must cast all the votes of the members in his or her constituency as a block, thus bringing his or her own judgment to bear on the matter.

1 See Articles of Agreement.2 See Financial Organization and Operations of the IMF, Appendix II, for a selected list of decisions requiring special majorities. Also: Leo van Houtven, Governance of the IMF, Appendix I.

Consensus decision-making by the Executive Board facilitates broad participation by members in the governance of the IMF. Since a formal vote is not taken, the official record of the meeting does not reflect individual voting positions unless Executive Directors specifically request that their position be recorded in the minutes. In recent years the IMF has been seeking ways of strengthening the participation of developing countries and countries in transition in decision-making at the institution. These efforts are summarized in Box 9.2. Some Board decisions are taken without a Board meeting. In these cases, decisions are circulated to the Board for approval on a lapse-of-time basis.

Voice and Representation

Background. There has been growing emphasis recently on voice and governance issues in the IMF. The “Monterrey Consensus” of March 2002 encouraged the IMF and the World Bank to find pragmatic and innovative ways “to continue to enhance participation of all developing countries and countries with economies in transition in their decision-making, and thereby to strengthen the international dialogue and the work of these institutions as they address the development needs and concerns of these countries.” In September 2002, the Development Committee requested the IMF and the World Bank to undertake a study on ways of broadening and strengthening the voice and participation of developing economies and economies in transition in decision-making at the Bretton Woods Institutions. Subsequent reports by the staffs of the IMF and of World Bank have been discussed by the IMFC and the Development Committee,1 and work is continuing. The Board of Governors approved a resolution on quota and voice reform in September 2006.

Strengthening the Voice and Representation of Developing and Transition Countries. IMF and World Bank staff have identified various possibilities for strengthening the voice and representation of developing and transition economies, including: greater support for large, multi-country constituencies; increasing the effectiveness of the constituency system; increasing the size or reviewing the regional composition of the Executive Boards; strengthening developing and transition countries’ voice at the Development Committee and the IMFC; and increasing the quota shares of developing and transition countries. At present, the Executive Board of the IMF is pursuing voice and representation issues on two different tracks—quota-related topics and administrative and capacity-building initiatives.

Quota Issues. The basic issues are whether some countries are “over-” or “under-” represented in the IMF based on economic size, and how best to achieve changes in quota shares to reflect such developments. Since voting power in both the IMF and the World Bank under the present system is strongly influenced by IMF quotas, the relative size of individual quotas has a direct bearing on the issue of participation in decision-making. In this regard, the approval of the resolution on quota and voice reform was a crucial first step. This resolution approved ad hoc quota increases for four clearly underrepresented countries (China, Korea, Mexico, and Turkey). Additional steps include a new quota formula, a second round of ad hoc quota increases, and an increase in basic votes. Progress will require a high degree of consensus among the membership. However, it should be noted that the tradition of relying on consensus decision-making at the Executive Board allows member countries to have a greater voice in decision-making than their voting shares might suggest.

Capacity-Building Initiatives. These initiatives seek to enhance the capacity of Executive Directors from developing and transition countries to participate effectively in decision making in the IMF and thereby better serve member countries. The following steps have already been taken: expanding the staff in offices of Executive Directors representing constituencies that have 20 or more members (namely, the offices of the two Executive Directors representing sub-Saharan African countries); making available informal, voluntary guidelines on the qualifications and duties of staff in Executive Directors’ offices in order to attract high-quality staff; providing additional training and orientation for new members of staff in Executive Directors’ offices; and using technological advances to facilitate close and effective communication by Executive Directors with their authorities in capitals, including the development of an Extranet in 2001—a secure vehicle for making electronic versions of Board documents available quickly to authorities in capitals—and the use of video-conferencing technology.

1 See Report of the IMF Executive Board to the International Monetary and Financial Committee (IMFC) on Quotas, Voice and Representation, available on the Internet at: http://www.imf.org/external/np/fin/2003/quota/eng/091203.htm.

Summings Up

Executive Board meetings may or may not conclude with a formal decision. Where they do not, the sense of the meeting is normally captured in a summing up of the Executive Board’s discussion, prepared by the Secretary’s Department of the IMF. In cases where a formal decision is not taken, the summing up may carry the force of a formal decision. Even if a formal decision is taken at the end of the meeting, a summing up of the discussion is normally prepared to document the context in which the Executive Board took the decision. The summing up may document any significant minority views. This occurs rarely in the cases of country discussions, but it is routine in cases of policy discussions. When the Executive Board’s discussion of a matter is of an exploratory or continuing nature, not intended to arrive at a decision of any sort, the Chair may make concluding remarks at the end of the discussion in lieu of a formal summing up of the discussion.

The summing up is read out at the end of the Board meeting for comment by Executive Directors. It may be revised on the basis of any such comments. In the case of a country discussion, the revised summing up is cleared by the Executive Director representing the particular country, before it is formally issued by the IMF. In the case of a policy discussion, the revised summing up is sent for clearance by all Executive Directors, after which it is formally issued. At the final clearance stage, Executive Directors may suggest further changes to the summing up. All the changes can only be accepted if they are consistent with the record of the discussion and the practice is to limit changes to the summing up, after it is read out at the end of the Board meeting, to only those that are necessary to ensure that the summing up accurately captures the sense of the Board discussion.

The summing up, and any formal decision, forms part of the minutes of the meeting. The minutes constitute the IMF’s official record of the Executive Board’s discussion of the subject.

Press statements are issued by the IMF after most Board meetings, in the form of a Public Information Notice (PIN) for policy and country surveillance discussions or a Chair’s Statement or Acting Chair’s Statement for country discussions involving the use of IMF resources.

Managing Director and Deputy Managing Directors

The Managing Director chairs the Executive Board, but has no vote except a deciding vote in the event of a tie. He or she is selected by the Executive Board for a five-year, renewable term. The Managing Director, in turn, appoints a First Deputy Managing Director and two Deputy Managing Directors to provide managerial support. One of the Deputies chairs the Board in the Managing Director’s absence. An Executive Director selected by the Board acts as Chair in the absence of the Managing Director and the Deputy Managing Directors, although this is a rare occurrence. The Executive Director retains the right to vote when serving as Acting Chair.

The Managing Director is chief of the operating staff of the IMF and conducts the ordinary business of the IMF under the direction of the Executive Board. He or she is ultimately responsible for all aspects of the internal management and working of the institution and its relations and communications with the outside world. The three Deputy Managing Directors share oversight of the IMF’s relationship with individual member countries, chair selected Executive Board meetings, and oversee staff work in specific areas.

Independent Evaluation Office

The Independent Evaluation Office (IEO) was established by the Executive Board in July 2001 to provide an objective and independent evaluation of the IMF’s policies and operations. It focuses on (i) the systematic evaluations of the IMF’s general policies; (ii) comparative cross-country analyses of the IMF’s economic policy advice, in the context of surveillance as well as IMF-supported economic programs; and (iii) evaluations of completed country operations. These studies complement the review and evaluation work undertaken within the IMF.

The IEO operates independently of IMF management and at arm’s length from the Executive Board. To ensure the IEO’s independence, the Director of the IEO is appointed by the Executive Board for a non-renewable term of six years. The Director is an official of the IMF but not a staff member, and may not be appointed to the IMF staff at the end of the term. The Director is solely responsible for the selection of IEO staff on terms and conditions set by the Executive Board. IEO staff are not IMF staff members and report only to the Director of the IEO. The IEO’s budget is approved by the Executive Board, but its preparation is independent of the budgetary process over which IMF management has authority. The IEO’s work program is determined by the Director in light of consultations with interested stakeholders from both inside and outside the IMF. The work program is presented to the Executive Board for review but is not subject to the Board’s approval. The IEO has sole responsibility for drafting evaluation reports, annual reports, press releases, and other public statements.

External Audit Mechanism

The IMF’s external audit arrangements consist of an External Audit Committee and an external audit firm. The External Audit Committee has general oversight of the external audit function and internal control processes and consists of three members selected by the Executive Board and appointed by the Managing Director. The members serve for three years on a staggered basis. They are independent, are nationals of different IMF member countries and must possess the qualifications required to carry out the oversight of the annual audit. The responsibility for performing the external audit and issuing the opinion rests with an external audit firm, which is selected by the Executive Board in consultation with the External Audit Committee and appointed by the Managing Director.