Select Committee on Treasury Minutes of Evidence

Further memorandum submitted by the Bretton Woods Project

  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 institutional issues.

  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, p 4).


  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.


  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 states:

    "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 candidates;

    —  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 :

  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 constituency.

    —  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

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