Uneven patterns of governance: how developing countries are represented in the IMF

ABSTRACT

The IMF is governed by a 24-member Executive Board which represents 184 countries. Although often prized as a small and efficient decision-making body, the Board represents some countries more effectively than others. This is due to the institutional structure and incentives within which the Board operates. Prime among them is a system of constituencies which have formed and evolved as countries have sought to improve their position in the organization. These groups vary in size, shared interests, and distribution of power. Their effectiveness is not only affected by these attributes. It is also determined by decision-making rules across the institution, by the lack of formal accountability of Board members, and by the strength of other coalitions of countries acting informally within the institution. The analysis implies that representation on the IMF Board could be improved without altering the size of the Board.

KEYWORDS:

• IMF
• representation
• accountability
• constituencies
• governance
• organization

Notes

¹Computed on the 19 elected chairs.

¹It includes the number of members within each chair. Its voting power refers to the 25 members of the EU across 10 chairs.

1 See Van Houtven (2002) for an overview of the IMF governance.

2 Boughton (2003) gives a good account of these changes. See Table 1 for a full list of constituencies, Table 2 for some descriptive statistics and Table 3 for a summary of their main features. This paper uses information correct as at October 2004.

3 Originally, Spain and Poland held the positions, respectively, as Alternate Executive Director and Senior Advisor to Executive Director in the constituency chaired by Italy.

4 Of the 19 elected chairs, China, Russia and Saudi Arabia are single-country constituencies and have not been listed in Table 4 and Table 5.

5 The analysis of rotational patterns is limited to the constituencies at the IMF Board. A joint analysis of IMF and other multilateral organizations constituencies is beyond the scope of this paper.

6 Gini coefficients measure the degree of concentration (inequality) of a variable in a distribution of its elements. While commonly used for assessing income distribution, they have also been employed in other instances to measure phenomena such as racial segregation, industry location, or, most recently, access to water or healthcare (see Epidemiological Bulletin, 2001).

7 Schedule E in the Articles of Agreements (supplemented by further regulations issued by the Executive Board) provides that the 19 candidates receiving the greatest number of votes shall be elected as Executive Directors for a term of two years, provided that they have received more than 4% of the votes cast (Schedule E, Sec. 2). If not, a second ballot is held and further procedures followed (Schedule E, SS. 3, 4 and 6). In practice, the outcome of these elections is negotiated ex ante within each constituency. Candidates are nominated according to each constituency's conventions and when elections are called the Governors cast their votes on the candidate nominated by the agreed country and later propose him to appoint the Alternate and/or the advisory staff in the Secretariat (usually from specified countries within a constituency).

8 With some exceptions in the late 1980s and early 1990s.

9 We thank Benny Andersen, Alternate Executive Director for the Nordic-Baltic constituency for directing us to this provision.

10 In the Section of the By-Laws devoted to the Executive Board it is stated that ‘The Chairman shall ordinarily ascertain the sense of the meeting in lieu of a formal vote …’ (C-10) and ‘There shall be no formal voting in committees and subcommittees. The Chairman of the committees or subcommittees shall determine the sense of the meeting …’ (C-11).

11 See Appendix II in IMF (2001a).

12 A univariate linear correlation coefficient computed on the relative voting power and the number of countries represented by each of the 24 seats at the Board is negative (–0.37). When taking into account only the 19 elected chairs it increases but still remains negative (–0.09).

13 Basic votes are attributed to the membership in a fixed amount regardless of the size of a member's quota. Each member is in total allocated 250 basic votes plus 1 vote for each part of its quota equivalent to 100,000 SDR (Art. XII, Sec. 5).

14 These calculations are based on figures produced by the Development Committee.

15 Currently, such assessments are available in 12 areas. More information is available at: http://www.imf.org/external/standards/index.htm.

16 More details are available at: http://www.imf.org/external/np/fsap/fsap.asp.

17 On burden sharing, see also Mohammed (2002).

18 Strictly speaking, the Italian and the Canadian-led constituencies are also mixed. However, their outstanding debt is almost negligible at 0.68 and 0.07% of their respective constituency quotas, on account of lending arrangements by Albanian and Dominica, respectively.

19 In 1999 legislatures in the UK, France and Ireland all passed laws requiring greater reporting on IMF issues, as did the Italian Parliament in 2003.

20 The Netherlands, Ministry of Finance, www.minfin.nl, accessed on 1 December 2004.

21 The Executive Director is the holder of the chair for the constituency by which he has been elected and, only when absent, his Alternate, appointed by the Director himself, has full power to act on his behalf. Alternatively, as the Articles stipulate, the Alternate may participate in meetings but may not vote when his appointing Director is present (Art. XII, Sec. 30). Furthermore, ‘… When a new elective Executive Director is named, the office of Alternate shall be deemed vacant and an Alternate shall be named by the newly elected Executive Director’. (By-Laws, Sec. 17).

22 This includes the aggregate voting power of the constituencies led by Canada and Italy.

23 The G7 are also core members of the G10, which has provided additional resources to the IMF through the GAB and NAB. See www.imf.org/external/np/exr/facts/gabnab.htm.

24 The EFC is composed of high-ranking officials from EU finance ministries and central banks. The representative from the finance ministries of Germany, France, Italy and the UK, serve also as G7 Deputies.

25 In those cases, when the country holding the EU Council rotating presidency is not a member of the euro area, then such a statement is made by the head of the euro group, i.e. the Board official from the euro area country which comes next in holding the EU presidency.

26 Bini Smaghi (2004) and Van Houtven (2004) elaborate on the perspective related to the consolidation of the EU representation into a single European Chair at the IMF Board. The former also gives a good account on EU coordination issues.

27 Actually, it may be argued that G7 membership—though formally country-based—is de facto chair-based. Germany, France, Japan, UK and US are represented at the Board through their own appointed Directors, while Italy and Canada head their respective constituencies, in which, however, they have a largely dominant role (see below).

28 At the time of writing, Mexico does not hold the chair of its constituency, which is shared in turn with Spain and Venezuela, but fills the position as Alternate Director.

29 Its current membership includes: Algeria, Côte d'Ivoire, Egypt, Ethiopia, Gabon, Ghana, Nigeria, South Africa, the Democratic Republic of Congo, Argentina, Brazil, Colombia, Guatemala, Mexico, Peru, Trinidad and Tobago, Venezuela, India, Iran, Lebanon, Pakistan, Philippines, Sri Lanka and Syrian Arab Republic.

30 Henning (1992) provides an historical overview of the Group.