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TWN Info Service on Finance and Development (Oct07/06)

24 October 2007


AFRICANS CALL FOR GREATER VOICE IN IMF

African countries have called for greater voice in the International Monetary Fund (IMF), including not only an increase in formal voting power and representation at its decision-making bodies but also in the diversity of its staff members, to better represent their interests at the institution.

In statements during the IMF’s Annual Meetings this weekend, African finance ministers and central bank governors have reiterated their calls for at least a tripling of basic votes as an outcome of the current quota and voice reform process to protect the voting shares of low-income countries.

They also called for a meaningful and expeditious increase in their representation at the Executive Board, including an amendment to the Fund’s Articles of Agreement to enable Executive Directors representing large constituencies to appoint more than one Alternate Executive Directors.

Below is a report on the African demands. It was published in the SUNS #6349, Tuesday, 23 October 2007.

This article is reproduced here with the permission of the SUNS.  Reproduction or recirculation requires permission of SUNS (sunstwn@bluewin.ch).

With best wishes
Martin Khor
TWN


Africans Call for Greater Voice in IMF
By Celine Tan, Washington DC, 22 October 2007

African countries have called for greater voice in the International Monetary Fund (IMF), including not only an increase in formal voting power and representation at its decision-making bodies but also in the diversity of its staff members, to better represent their interests at the institution.

In statements during the IMF’s Annual Meetings this weekend, African finance ministers and central bank governors have reiterated their calls for at least a tripling of basic votes as an outcome of the current quota and voice reform process to protect the voting shares of low-income countries.

They also called for a meaningful and expeditious increase in their representation at the Executive Board, including an amendment to the Fund’s Articles of Agreement to enable Executive Directors representing large constituencies to appoint more than one Alternate Executive Directors.

In a statement to the International Monetary and Financial Committee (IMFC), Nigerian finance minister Shamsuddeen Usman, representing 19 African countries, said that they welcomed the Board’s decision to consider such an amendment but reiterated their disappointment that the Board has only approved the appointment of one additional Advisor for each of the two African Executive Director’s offices, contrary to the spirit of the Singapore Resolution on voice and representation.

Africa is especially under-represented at the IMF even though the region accounts for a quarter of the membership and now accounts for the bulk of the Fund’s operations.  There are only two Executive Directors for 44 sub-Saharan African countries and their combined votes are less than 5% of the total voting power of Fund members, resulting from the progressive erosion of basic votes as a percentage of overall votes with capital increases over the years.

If, as indicated in the language of the IMFC’s communiqué that Fund members are working towards a 10% capital increase in the current reform process, developing  countries have argued that only a trebling of basic votes is sufficient to maintain the status quo of voting rights at the Fund for low-income countries, such as African members. However, the IMFC communiqué only went as far as committing to “at least a doubling of basic votes”.

The frustration of African countries on the representation issue was palpable. At a press conference on Saturday, Abou-Bakar Traore, Minister of Economy and Finance for Mali, said that African Governors of the IMF wanted their interests and concerns to be better taken into account in the institution. “We need to make progress. We have all said that. African countries are moving forward, but we cannot change overnight, so we are hoping for greater representation within both institutions. We want an evolution.”

Traore added: “We are members of both institutions, and we notice that the World Bank and the IMF have been more inclined to listen to some positions than others. We are faced with great constraints. We are not asking for blanket help, unconditional assistance, but we want our concerns to be better taken into account.”

African countries urged for measures to increase the representation of Africans at all staffing levels at the Fund, including the appointment of an African Deputy Managing Director, to be undertaken expeditiously. Usman said the current situation “where Africans account for only 5.6% of the Fund’s staff relative to a recommended diversity threshold of 8%” is “unacceptable”.

Elaborating on this point at the press conference, Usman referred to the appointment of Ngozi Okonjo-Iweala as Managing Director of the World Bank and urged the IMF to undertake steps, as part of its governance reforms, to “identify suitable Africans and get them into the higher echelons of the institution”.

This was echoed by Algerian central bank governor Mohammed Laksaci, representing seven countries from Africa, the Middle East and South Asia, who said that the significant under-representation of some regions within the Fund staff and management, notably Africa and the Middle East, must be addressed. He also said that strong political will, especially from advanced countries, is needed to achieve a decisive reform package that results “in a significant redistribution of the voting shares from advanced to developing countries as a group”.

On the Fund’s new income model, African countries said that they did not support proposals to charge for IMF technical assistance (TA) to low-income countries as part of the Fund’s income-generating activities. “We stress that the review of TA should not lead to low-income countries being charged for TA and training which should continue to be provided free of charge as public goods,” said Usman.

Laksaci said that both the proposals to charge for technical assistance and for the reimbursement to the IMF’s General Resources Account (GRA) of the cost of administering its concessional lending facility, the Poverty Reduction and Growth

Facility (PRGF), “would reduce financing available to low-income countries”.

An expert panel chaired by Mr. Andrew Crockett, former General Manager of the Bank for International Settlements (BIS), earlier this year recommended the imposition of charges for capacity building projects to offset the expenses and to discipline the use of such services. It also recommended that funds from the GRA, derived primarily from crisis financing to middle-income countries, should not be used in principle to finance other IMF activities, including defraying the expenses of the PRGF, and that PRGF costs should be reimbursed or donor funds sought to defray them.

While opposing reimbursement of PRGF administrative expenses (by charging for PRGF concessional finance), African and other low-income countries were supportive of the Crockett Panel’s recommendations for establishment of an endowment from proceeds from gold sales and broadening its investment portfolio.

Usman urged that the work on this new income model be undertaken expeditiously, “including amendment of the Articles of Agreement and further consultations with capitals on gold sales for ratification by national parliaments”. He added: “Protracted discussions on a new income model without action on options for which consensus exists would not convey the sense of urgency the matter deserves”.

In their communiqué, the IMFC had called on the Executive Board to develop specific proposals on the new income model and the new expenditure framework by the time of the 2008 Spring Meetings, and to agree on a new and detailed medium-term budgetary envelope for the 2009 budget “that is consistent with the emerging income and expenditure framework”.

On the issue of the IMF’s role in low-income countries, Usman said that African countries were of the view that a redefinition of the Fund’s role in these countries “should not imply a retreat from the traditional areas of Fund support”, such as under the Article IV consultations, PRGF lending and debt relief but also to address additional “issues of improved program design, aid for trade, enhanced fiscal space, non-Paris Club debt relief, debt sustainability, financial sector development, macroeconomic stability and growth”.

He also said that sub-Saharan African countries expected the Fund “to play an effective catalytic role in bringing about prompt and successful conclusion of the Doha Round” and that assistance in the implementation of trade-related reforms and strengthening competitiveness in low-income countries be stepped up under the Enhanced Integrated Framework (EIF) and that donors should redeem their pledges of increased aid for trade.

 


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