Appointments to UN Agencies - IMF
The International Monetary Fund (IMF) is an organization comprised of 185 member countries. Founded to help rebuild Europe in the wake of World War II, the IMF is best known for providing loans to countries facing financial crises. The IMF's additional stated purposes include fostering economic cooperation, growth and high employment, and promoting stability in exchange rates. The IMF currently has an outstanding loan portfolio of $28 billion to 74 countries.
On June 28, 2007 the current Managing Director of the IMF Rodrigo de Rato unexpectedly announced his resignation from the post. Member states and civil society groups immediately began calling for reform of the selection process for Managing Director. Under a longstanding agreement, the EU has chosen the Managing Director of the IMF and the U.S. has chosen the President of the World Bank.
Despite an early agreement by European Union countries to insist on the tradition one more time and to support Dominique Strauss-Kahn of France for the position, the IMF's Executive Directors announced on July 12 that they would consider candidates "without geographical preferences."
The Executive Board accepted nominations until August 31, 2007 with only one additional nominee emerging. On August 22, 2007 Russia nominated Josef Tošovský, a national of the Czech Republic.
Like the World Bank, the IMF's organizational hierarchy begins with the 185 Member States, which mostly overlap with the member countries of the World Bank. Each Member State is represented by a governor, often the finance minister of the country, and the 185-member Board of Governors meets once a year. It is through the Board of Governors that Member countries can hold the Fund accountable.
For day-to-day management of the Fund, the Board of Governors appoints a 24-person Executive Board. The Executive Board is made up of eight Executive Directors selected by single countries - the five largest shareholders of the Fund (the US, Japan, Germany, France and the UK) and China, Russia, and Saudi Arabia - as well as 16 Executive Directors elected for two-year terms by groups of countries ("constituencies").
Selection Process of Managing Director
It is the responsibility of the IMF's Executive Board to select the Managing Director. The IMF 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 thus are larger shareholders. This affects decision-making among Members; 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 (MD).
The MD has a five-year, renewable term and holds a similar role as the World Bank president. The MD serves as the chair and the chief of the IMF staff, reports to the Executive Board, and is assisted by a First Deputy Managing Director and two other Deputy Managing Directors.
Calls for Reform
The Managing Directors of the IMF have been nationals of six Western European countries: Germany, Belgium, Sweden (two), France (three), the Netherlands, and Spain. All nine MDs have been men.
The IMF faces ongoing criticism for its decision-making practices as larger developing states such as Brazil, India and China argue that they and smaller developing countries hold disproportionately less influence than developed Member States. (For example, all of Africa has a total of only 4.4% of the voting shares, while the United States holds almost 17% of the voting power.) Opening the selection process of the Managing Director to non-Europeans is among the changes demanded.
Many calls for reform have come from within the IMF itself and its Member States including a former Managing Director. European leaders have resisted reform until similar reforms are undertaken at the World Bank. When the World Bank President Paul Wolfowitz resigned in May 2007, widespread calls to end the US selection monopoly led many Member States and observers to speculate that the process to replace him would be open and competitive. However, the U.S. reasserted its claim to the selection of the candidate and the EU supported the American nomination, presumably in tacit exchange for its continuing privilege of nominating the head of the IMF. When addressing the selection tradition, European leaders argued that ending the tradition at the IMF should come together with reform in the process at the World Bank.
In a press release July 12, 2007 the Executive Board detailed a Candidate Profile and Selection Procedure for the Managing Director.
Candidate Profile: The Board agreed that the successful candidate will have:
- A distinguished record in economic policymaking at senior levels;
- An outstanding professional background;
- Demonstrated managerial and diplomatic skills needed to lead a global institution;
- Nationality from any of the IMF's 185 members;
- The ability to provide strategic vision for the work of a high quality, diverse, and dedicated staff;
- A firm commitment to advancing the IMF's goals by building consensus on key policy and institutional issues, including through close collaboration with the Executive Board;
- Proven understanding of the IMF and the policy challenges facing its diverse global membership; and
- Effective communication skills.
- Any Executive Director can nominate an individual for the position of MD.
- An Executive Director may nominate nationals of any Member States.
- The nominations will be kept confidential until the nominee confirms willingness to be considered.
- Nominations will be accepted beginning immediately and until August 31, 2007.
- The Executive Board will consider nominees after the closing date for nominations.
- Nominees will be considered "on the basis of the above candidate profile, without geographical preferences."
The two candidates declared before the August 31 deadline were Dominique Strauss-Kahn and Josef Tošovský. The Executive Board met with both candidates in September 2007 in Washington, D.C. Strauss-Kahn and Tošovský both released statements detailing their view of the Fund, in which each stressed the need of greater representation for developing countries in the IMF.
On 28 September, the Executive Board formally named Dominique Strauss-Kahn as Managing Director. Strauss-Kahn was selected by consensus in a decision that was widely expected after the European Union and the United States announced their support of his candidacy.
Strauss-Kahn indicated in interviews and statements that reform of the Fund will be a priority for him, noting that the Fund is at a "crossroads." He acknowledged that many developing countries question the legitimacy of the Fund. Further, many developing and least developed countries find the Fund less relevant to and less representative of their needs. To address this, Strauss-Kahn advocated a double-majority decision-making structure, which requires two separate majorities, one based on "one-country-one-vote" and the second based on economically weighted quotas. He also commented on the current selection process for Managing Director of the Fund, calling it "less and less defensible" and stating that "the MD has to be chosen on merits without any reference to his or her nationality."
In his statement upon being selected, Strauss-Kahn spoke of his "strong legitimacy" based on broad support including from low-income countries. He committed to "pursue without delay the reforms needed for the IMF to make financial stability serve the international community, while fostering growth and employment." (Statement by Strauss-Kahn)
The EU has implicitly promised not to insist on a European MD after Strauss-Kahn's five-year term is over. The president of the Eurogroup said in August, "within the Eurogroup and among the EU's finance ministers, everybody agrees that Strauss-Kahn will probably be the last European to lead the IMF in the foreseeable future." The comment was interpreted by many commentators as an offer to support a non-European candidate next time, if developing countries would support Strauss-Kahn now.
Related UNElections Monitors
- Issue 38 - November 12 - IMF Publishes Terms of Appointment for Strauss-Kahn
- Issue 30 - September 28 - IMF Selects Strauss-Kahn by Consensus in “Transparent, Competitive Process”
- Issue 29 - September 21 - IMF Board Interviews Candidates, Will Select Next MD by September 28
- Issue 26 - August 30 - Deadline for IMF Nominations This Friday, Support for Two Candidates Uncertain
- Issue 25 - August 23 - Second Candidate Nominated for IMF Managing Director
- Issue 23 - August 10 - Deadline Approaching for IMF Candidates
- Issue 21 - July 17 - IMF Head Resigns; IMF Opens Selection Process to All Member States