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IMF Reform: Tinkering at the Margins

Anne Kruger’s comments in yesterday’s Financial Times article (“IMF to give more weight to Asian vote”) disingenuously makes it sound as if there is still some scope of negotiation on IMF governance reform.  In fact, behind closed doors, both the G7 and the G20 are actively closing a deal on a minimal change to the representation of an extremely limited number of nations (China, Korea, Mexico and Turkey only) to be agreed upon in Singapore.

While the fact that such discussions are now taking place in the context of the G20 rather than exclusively amongst the G7 club of rich industrialised nations is encouraging as it acknowledges the importance of including large middle income developing countries in decisions on global governance, the failure to negotiate a more comprehensive package of reforms benefiting other countries (those that are currently underrepresented in the Fund but are smaller or have less clout, e.g. Malaysia and Egypt, and African nations whose voice remains minimised) through a more inclusive governance reform debate is shameful and further undermines the legitimacy of the Fund and Bank.  The idea that a further stage of reform will take place in the coming year to address both the archaic formula which determines quota vote and the weighting of basic votes is also unlikely to happen once this meagre reform is meted out.

This leaves us with, essentially, the status quo ex ante.  Europe will have escaped with only the smallest dilution of its voice (rumours suggest less substantially than a 1% collective reduction), many developing nations will be reduced rather than made more active participants and Africa will remain woefully unable to express its opinion. In a time in which the IMF management has looked carefully at the challenges to its relevance in the coming years, it is disappointing that constituents could not be persuaded to think more broadly about addressing the governance failures at the centre of the debate.