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Options for democratising the World Bank and the IMF - Paul Ladd
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2. Summary
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The World Bank and IMF have promoted participation in national decision-making, yet their own workings remain largely hidden. The Monterrey Consensus, agreed at the Financing for Development Conference in March 2002, stated that the IMF and World Bank should 'continue to enhance the participation of all developing countries and countries with economies in transition in their decision-making.'
This paper looks at how developing countries are represented in the governance structures of the World Bank and IMF. The analysis contained in the paper takes as its starting point the fundamental right to representation. Poor countries and poor people have a right to be adequately represented at the institutions of which they are 'clients'.
Beyond this right to representation lie issues of the effectiveness of the institutions. It is likely that better representation of the poorest countries at the IMF and World Bank would lead to more appropriate, and better-informed, decision-making and ownership. In turn, better representation would improve the effectiveness of both institutions in contributing towards poverty eradication.
The paper argues that changes to the current systems of IFI governance systems are needed in the following areas:
- Voting
IFI voting structures should, ideally, be based on the principle of one-country-one-vote, or one-person-one-vote. Since this is unlikely to be achieved in the near future, reforms are needed that move in this direction. These include increasing the basic vote allocated to all countries and a more fair and transparent formula for allocating votes based on economic size and population. Double-majority voting should be introduced for special votes and the consensus system of decision-making should be replaced with up-down voting with all votes published.
- Seats
Allocation of seats on the boards and the oversight committees should be reformulated to give a wider range of members access to decision-making. The allocation of board seats and seats on the International Monetary and Finance Committee (IMFC) and Development Committee needs to be revised to give balance between industrialised, middle-income and low-income countries. The size of constituencies should be equalised with no single-seat constituencies.
- Capacity
The capacity of executive directors (EDs) who represent developing countries would be significantly enhanced by reducing the size of the largest constituencies. There are currently some limited efforts to increase staff in these constituencies and widen their access to technical expertise.
- Board transparency
In order to improve the transparency of IFI board meetings, detailed minutes should be published within two weeks. Formal votes should replace the current system of consensus decision-making. At a minimum, EDs should be required to publish the statements they make to the board.
- Selecting leaders
A fair and transparent process for selecting IFI leadership is essential. All countries should be able to nominate candidates; there should be no restrictions placed on a candidate's nationality; and the voting process should be fair and transparent. When selecting leaders each member country should have a single vote.
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