A new council of politicians, modeled on the newly-powerful G20 group of rich and developing economies, should run the IMF, a leading expert on the Fund has told Emerging Markets.
Stanley Fischer, governor of the Bank of Israel and a former IMF first deputy managing director of the IMF, said the G20 and Fund boards could converge as part of a wider reorganization.
The council would replace both the IMF executive board, made up of full time officials, and the International Monetary and Financial Committee (IMFC), which is made up of ministers but only has an advisory role.
Fischer’s views will carry weight, as he is a co-author of a report on IMF reform that will be published tomorrow by the Group of 30, an international body of financiers and academics.
The idea of an IMF Council was also given strong support by the so-called Committee of Important Persons, chaired by South African planning minister Trevor Manuel, that was commissioned by the fund to look at options for IMF reform.
In an interview ahead of the Annual Meetings, Fischer said the Fund was hampered by the attitude of some members that it was a body over which they did not have real influence.
“When you ask countries why they prefer to operate in groups or in Gs rather than through the board of the IMF, they complain about the bureaucracy and the influence of the staff,” he said.
“Well, if it’s the IMF council, they can run their meetings as they want and they can make them less formal if they want. So it is not a matter of ‘here is the Fund and it decides’, because it is not the Fund that would decide if the G20, or something close to it, became the council of the IMF.”
Fischer said that the composition of the G20 and the IMF’s executive board were similar. “Somewhere down the road the G20 and the board need to converge and the membership of the G20 and the board need to converge. You don’t need two separate bodies.”
He acknowledged that this would fuel the debate about the allocation of seats. The US wants to see the board cut from 24 to 20 seats, with Europe losing most of the seven seats it holds.
“There will be a real issue of how many European countries are in it, because the G20 has expanded to add a few European countries, which is not what not one had thought was missing from the current board of the IMF,” he said.
European countries such as France, Germany and the UK, which have permanent seats on the board, are resisting calls to shrink their share. British Chancellor of the Exchequer Alistair Darling told Emerging Markets: “There is the principle that there is no taxation without representation.
“We are a substantial donor and so are some other countries, and we feel quite strongly that we need to be represented too. There has to be a rebalancing, but we need to be there.”
Guillermo Ortiz, the governor of the Mexican central bank and a co-author of the Group of 30 report, told Emerging Markets he wanted the IMF to be seen as legitimate and authoritative. “The centre of gravity in the world has changed and the structures of governance and governability in the fund must also change.”