Further memorandum submitted by the Bretton
The Bretton Woods Project would like to take
this opportunity to provide further evidence to the Committee
on four areas.
Bretton Woods Project and others welcomed the
IMF's announcement that it is to narrow down the conditionalities
it sets to three areas (the exchange system, the financial sector
and fiscal policy). The logic of this is that it should also restrict
its advice to these areas, ie discussing/setting overall targets,
but leaving governments to work out which budgets to cut/how to
make the savings. In the case of Malawi this year, as elsewhere,
this does not seem to be the case, as the IMF is discussing detailed
This also relates to the question of who should
do what poverty and social impact analysis (PSIA). We feel that
for reasons of competencies and mandate the IMF should not be
responsible for analysis on all areas, but should be responsive
to and supportive of analysis done by others. This is the clear
recommendation of Ministers in the HIPC Finance Ministers Network
(which brings together ministers from 33 Heavily Indebted Poor
Countries) in their March 2002 declaration. This urges the Bretton
Woods Institutions to:
"redouble efforts to . . . dramatically
accelerate PSIA in HICPs. Analysis of the links between macroeconomic
and structural policies and poverty reduction remains among the
weakest areas of most PRSPs, and it is essential to equip countries
with the tools to conduct their own PSIA rather than depending
on outside assistance. These tools should have input from the
BWIs and donors, but be administered and disseminated by independent
capacity-building sources, to avoid conflict of interest for partners
in the negotiation process of PRGF and PRSC frameworks."
(Declaration of the 6th HIPC Ministerial Meeting, 5 March 2002,
2. IMF SEAL OF
The presence of an active IMF lending programme
is used by other official agencies as an indicator of whether
they should have an active programme in that country. When the
IMF suspends or cancels its programme others also do so, triggering
a domino effect of funding cuts which may leave poor country governments
with major budget shortfalls. This occurred in Bolivia earlier
this year, and many bilateral donors active in that country expressed
concerns that the IMF had been too harsh, and should have examined
other possible reasons why the Bolivian Congress had not passed
the tax reform legislation laid down as a conditionality.
These problems have arisen in many other countries
in the past (eg Kenya, Senegal, the Philippines). It is unclear
whether an active IMF programme is really the best indicator of
which country should get aid money, certainly if aid is supposed
to be focussed on meeting the MDGs. Alternative approaches would
be to rely on IMF surveillance/assessments (not only lending),
or for individual donors to make up their own minds, based on
IMF assessments and those from other resources. Bretton Woods
Project favours moving towards the latter. The committee might
like to ask what is the UK government's position on this.
IMF MANAGING DIRECTOR
The selection of Mr Koehler as the new Managing
Director of the IMF to succeed Mr Camdessus appeared to be an
undignified tussle between European governments and between them
and the US government. The Bretton Woods Project and many others
called then for a better process to be instituted for next time.
The UK government has also committed itself to promoting a more
open and meritocratic process. Its White Paper on globalisation
"in all these institutions [IMF, WB, WTO],
the UK government favours open and competitive processes for the
selection of top management. This could include a definition of
the competencies for the post, selection and search committees
and a clear process for taking the final decision, in which competence
would be put above considerations of nationality". (Eliminating
World Poverty: Making Globalisation Work for the Poor, p 10).
Some 120 representatives of NGOs and other organisations
signed a letter in January 2000 urging a new process for selecting
and appointing candidates to incorporate the following:
disclosing the criteria that are
being sought in a candidate;
encouraging all members to propose
making public the list of candidates;
requiring candidates to make public
what their priorities would be at the IMF helm;
instituting a recorded, public Board
vote on candidates.
(Letter to IMFC, available at : www.brettonwoodsproject.org/action/imf/letter.html)
It appears that the review by the IMF Board
working group on the process for selecting Managing Director has
resulted in few, if any, concrete changes. We urge the Treasury
Committee to inquire how a shortlist of candidates to succeed
Mr Koehler will be selected when the time comes, and how a final
decision will be made.
The Bretton Woods Project published a paper
in January 2001 (Structural Adjustment for the IMF, Options for
Reforming the IMF's Governance Structure) which reviews many of
the proposals made by different commentators on how to improve
the IMF's inequitable governance structure. We attach this paper
here in full but would like to highlight the following recommendations:
Increase number of constituencies
and EDs and allocate the new ones in favour of developing countries.
Reduce the number of countries per
Establish sub-boards, or working
and oversight committees to examine issues of particular interest
to/impact on specific sub-groups of IMF member countries.
De-link voting rights from the quota
formula. Allocate votes on a more equitable basis not solely dependent
on economic strength.
Publish minutes of Board meetings
and Board statements.
Formalise voting procedures and make
them more transparent.
On transparency of the current Board and of
the UK's position within it, we argued in our May 2002 submission
to you that whilst the Treasury's annual report outlines the UK's
broad position in certain areas it "does not fully detail
what the UK's position was on each (ie how it did or would have
voted)". We urge you to press the IMF and the British government
to follow up on the report of your predecessor committee from
the last parliament which recommended publication of Board minutes
and positions as well as the limited number of formal votes:
"It remains the case that even allowing
for the publication of the annual report, the actions of the UK
and the Executive Board as a whole remain opaque. Most notably
neither the votes, nor the minutes, of the Executive Board are
published. We believe that, because the Executive Board is the
ultimate decision making forum of the Fund, withholding this information
limits our ability to hold the Government to account for their
actions at the Fund . . . [Treasury official] Mr O'Donnell also
stressed that `. . . votes are incredibly rare on the Board .
. . quite often when the discussion is taking place, everybody
is aware of where a vote would get to and therefore a vote is
not taken'. Whilst we appreciate the reasons why there are few
votes taken at the Executive Board meetings, and why the IMF operates
broadly on a consensus basis, this makes it all the more necessary
to publish the minutes, so that the reasoning behind the decisions
can be fully understood. Whilst it may be clear to `everybody'
who attends the meeting `where a vote would get to', as long as
no such vote is taken and no formal record of the meeting is made
public, it is far from clear to `everybody' outside the meeting
what position their representatives would have taken.
We did not find officials' arguments against
publication of the minutes or of the voting record convincing.
We note that publishing the minutes and the votes of the Monetary
Policy Committee meetings has proved highly beneficial in enhancing
the transparency of the monetary framework. We are concerned that,
without a similar clear record of the proceedings and formal votes
of the Executive Board, the ability of this Committee to hold
our representative at the IMF to account is much reduced. We therefore
strongly recommend that the Chancellor push for a full publication
of the Executive Board meeting minutes and begin to publish the
UK voting record at the IMF immediately" (Fourth Report.
The International Monetary Fund: A Blueprint for Parliamentary
Accountability. Treasury Committee, 2001).
28 June 2001