Paltry voting reforms in IMF governance
The 184 member nations of the International Monetary Fund (IMF) formally approved on Monday, a proposal to raise slightly the voting shares of China and three other developing countries in the biggest reforms in the fund’s six-decade history but critics say the changes are cosmetic.
The IMF move, which received over 90 per cent approval, appears to be part of the global financial institution’s attempt to re-invent itself amidst strong civil society criticism and a looming IMF budgetary crisis. Earlier in the day, a group of 13 accredited activists created a stir when they staged a protest against IMF loan conditionalities inside the Suntec Convention Centre, the venue of the annual meetings of the board of governors of the IMF and the World Bank from September 19-20.
The International Monetary and Financial Committee (IMFC) of the IMF Board of Governors had stressed the importance of its “quota and voice reforms” in a communiqué after its meeting on Sunday.
The first stage grants four countries — China, South Korea, Mexico and Turkey — a small increase in their voting power despite opposition from 23 developing nations who are concerned that their own inaudible voices will be further diluted.
Critics say the four countries will get only an additional 1.8 per cent in voting power and rich nations would still control the IMF. But it is the meagre voting “reforms” that have left activists here fuming.
Decisions at the IMF require an 85 per cent majority but the US still holds a 17 per cent voting share, giving it an effective veto power. Stephen Mandel of the London-based New Economics Foundation (NEF) noted the absence of any fundamental reforms.
According to his calculations, Africa, which has only two seats on the 24-seat IMF Executive Board of Governors, has a total of only 4.4 per cent in voting power. One of these seats, representing a constituency of 24 African countries, has just 1.4 per cent of total voting power.
Voting power comprises two components: a weighted allowance of votes based on members’ contributions or quotas and 250 ‘basic votes’ for each country designed to reflect the equality of states.
As quotas have increased 37-fold since 1944, the share of all basic votes has plunged to 2.1 per cent of total voting power — a meaningless level — down from a high of 15.6 per cent in 1958 and 11.3 per cent in 1944, when the IMF was established.
What the IMF has put forward in governance reform is paltry, says Jeff Powell, coordinator of the Bretton Woods Project (BWP), a London-based watchdog group scrutinising the IMF and the Bank. “So far there is no indication that the big players have recognised that they are over-represented and are willing to make the concessions needed to solve the crisis of legitimacy,” he said. Powell said eight Britain-based NGOs including Christian Aid, OXFAM and CAFOD had instead endorsed a BWP proposal for a ‘double-majority’ voting system under which decisions would be made by both a majority based on voting weight as well as a straightforward majority in terms of number of member countries. Others, though, would prefer to see an end to the whole economically weighted voting system that favours the richer nations. — IPS