August 10 - Issue 23 - Deadline Approaching for IMF Candidates

New York, August 10, 2007 - The deadline for new candidacies for the next Managing Director of the International Monetary Fund (IMF) is August 31, approximately three weeks away.

No additional candidates have been nominated since Dominique Strauss-Kahn of France secured an informal nomination from the European Union, on July 10. The "Group of 24" (minority shareholders in the Fund) recently issued a statement suggesting that potential candidates may be holding back because of doubt that EU members will observe the guidelines for a merit-based selection process.

Background

A long-standing, informal agreement between the United States and Europe gives European countries the prerogative to select the Managing Director of the IMF and the US administration the choice of President of the World Bank. Following Rodrigo de Rato's unexpected resignation as Managing Director of the IMF last month, Member States and civil society groups immediately began calling for the IMF to reform the selection process for Managing Director. In particular, critics of the tradition wish to see non-European candidates considered for the position in an open, competitive process.

However, on July 10, the EU agreed to support a competitive selection procedure following the next appointment - but not for de Rato's replacement. The EU also announced its support for Strauss-Kahn to replace de Rato.

In contrast to the EU's desire to postpone an open process, the IMF's Executive Board decided to invite non-European candidates immediately. The Board negotiated new selection guidelines on July 12 at the initiative of developing countries and their European allies. The Directors established job qualifications (a "candidate profile") for the Managing Director for the first time in the IMF's history and invited nominations from any Member State. They also committed to appointing the next Managing Director based on merit, "without geographic preferences." If observed, this official opening of the selection process could allow for a non-European to lead the IMF for the first time.

To select the Managing Director, the IMF's Executive Board uses a weighted voting system that gives economically larger member states more votes. The countries with a larger economic size have a larger "quota" in the IMF and are considered larger shareholders. This affects decision-making among Member States; an 85% majority is required to adopt a decision. However, most of the decisions taken at the level of the Executive Board are made by consensus. When possible, this includes the decision to appoint the Managing Director.

Call for EU to Observe IMF Guidelines

The G-24, or Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, is a coalition of countries of Africa, Latin America and the Caribbean, and Asia representing the minority shareholders in both the IMF and the World Bank. The members are: Algeria, Argentina, Brazil, Colombia, Democratic Republic of Congo, Cote D'Ivoire, Egypt, Ethiopia, Gabon, Ghana, Guatemala, India, Iran, Lebanon, Mexico, Nigeria, Pakistan, Peru, Philippines, South Africa, Sri Lanka, Syria, Trinidad and Tobago, and Venezuela.

On July 23, the G-24 said: "We are of the view that [the IMF's newly agreed] principles provide the basis for a transparent selection process, but non-European candidates will only be prepared to come forward if there is confidence that the spirit of the aforementioned executive board commitment will be respected by all members. We therefore commit ourselves fully to these principles and call on advanced economies to do the same."

According to media reports, IMF sources have further suggested that potential candidates are holding back, saying, "highly qualified candidates from developing nations are hesitating to apply for the managing director position because they see the process as skewed in favour of ... Dominique Strauss-Kahn" (Inter Press Service). South Africa's Finance Minister Trevor Manuel is considered an especially strong candidate but is not willing formally to declare a candidacy without indications that the EU will observe the new guidelines for a competitive selection process.

Russia also said that it does not consider the current proceedings to select the next MD transparent or competitive enough. "At present, this procedure does not look like a procedure of open competition," said Finance Minister Alexei Kudrin.

Developing Countries' Positions on Strauss-Kahn

As for developing countries' assessments of Strauss-Kahn, South African President Thabo Mbeki recently called him a "good candidate" and "a very competent person" but said he wanted all countries' input to be considered.

Senegal's President Abdoulaye Wade said that Senegal supported Strauss-Kahn's candidacy because of his expressed commitment to the concerns of Africa and the developing world.

On July 30-31 Strauss-Kahn meet with the African Caucus of the International Monetary Fund, and they later issued a statement welcoming his commitment to "put Africa at the center stage of the reform process, to have regular consultations with them at the highest level, and to take into consideration their concerns should he be selected as Managing Director of the Fund." As a caucus, the African governors did not explicitly endorse Strauss-Kahn.

Strauss-Kahn says that he also has the support of Saudi Arabia and Brazil. According to French President Nicolas Sarkozy, Egypt also backs Strauss-Kahn.

Russia, on the other hand, decided not to reveal its position on Strauss-Kahn until after the August 31 deadline so it could consider possible additional candidates. Finance Minister Kudrin said after meeting with Strauss-Kahn on August 9, "We don't know all the nominees yet and are studying other possibilities." Russia will base its decision on the candidates' "economic program and professionalism."

Next Steps

  • August 31: Last day for Executive Directors to nominate candidates for Managing Director.
  • September: Executive Board will interview candidates and consider them; Final decision expected within September.
  • October 21: World Bank-IMF Annual Meeting in Washington, DC; Current MD Rodrigo de Rato's resignation becomes effective.

Relevant Documents

G-24 Statement on the Selection of Managing Director of IMF - July 24, 2007

Statement by the African Governors to the IMF on Dominique Strauss-Kahn - August 3, 2007

Press Release: IMF Process for Selecting the Next Managing Director - July 12

In the News

"Russia Says Procedure to Select New IMF Chief Not Transparent" - Itar-Tass, August 9, 2007

"Russia Says Undecided on Which Nominee for IMF Head to Back" - Interfax, August 9, 2007

"Strauss-Kahn Says S. Africa, Brazil, Saudi Back IMF Bid" - Reuters Africa, August 8, 2007

"Europe Fights Plans to Give Emerging Economies Bigger Say in IMF" - EU Observer, August 7, 2007

"African Caucus Hails Aspiring IMF Chief's Focus on Africa" - Servihoo, August 3, 2007

"Strauss-Kahn Lobbies South Africa for IMF Candidacy" - Reuters, July 29

"France's Strauss-Kahn Only IMF Candidate So Far" - EU Business, July 27

"Not Much Room at the Top" - New Statesman, July 26

"Paulson Praises French Candidate for IMF Job" - ABC News, July 26

"G24 Calls for Respect of Open IMF Search for Next Chief" - Turkish Press, July 23

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