Rich countries, including the US, are coming around to the view that poorer countries should have greater representation in the World Bank and the IMF, Ariel Buira, the director of the G24 secretariat told Emerging Markets yesterday. Governance reform at the institutions will top the agenda at tomorrow's meeting of the G24, the intergovernmental group on International Monetary Affairs and Development. It will focus on how to increase representation for poorer countries and to shake up the voting structure at the Fund and the Bank.
Buira is cautiously optimistic. 'It is the first time we are seeing some response from developed countries, in particular the US, who realize that the Fund is losing legitimacy,' he said. In addition, IMF Managing Director Rodrigo de Rato has called on shareholders to give poorer countries an increased voice in management of the institutions.
An increased withdrawal over the past years by larger Asian and Latin American countries is threatening to marginalize the Bank and the Fund in these regions. Brazil, for example, completed its last IMF programme this year, while Argentina, since its default, still remains outside the Fund's remit. More such withdrawals 'would leave the IMF with the poorest countries and it would no longer be a major multilateral institution,' added Buira.
Developing countries and emerging markets now account for 50% of global economic output, and the G24 feels that these countries are not adequately represented at the Fund. In the case of sub-Saharan Africa, two executive directors represent over 40 countries, most of which have a large number of complex programmes. Increasing staff levels of such offices is a key demand the G24 has made to the Development Committee, which oversees the transfer of resources to developing countries. 'The Fund used to be a credit cooperative: everyone contributed, everyone borrowed,' said Buria. 'Now, a few creditor countries make the rules without letting others have a greater voice.'
Enhancing the voice and participation of developing and transition countries has received increasing attention at the Bank and Fund since 2002, when the Monterrey Consensus encouraged this development. But progress has been slow. A Development Committee progress report from earlier this month, to be presented at the meeting on Sunday, says that 'considerations on changing the voting structure of both the Bank and the Fund are proving to be complex. . . . Finding areas with broad support has been difficult.'
But with the IMF's own strategic review, released earlier this week, acknowledging disquiet, the time could be ripe for change.