Civil groups urge more transparency in IMF

Civil groups urge more transparency in IMF

Thu Sep 3, 2009

By Lesley Wroughton

WASHINGTON, Sept 3 (Reuters) - Civil society groups on Thursday urged more transparency in decision making at the International Monetary Fund and said voting power of member countries did not reflect the world's new economic order.

In a new report by the groups, which include global think tanks and poverty organizations, said the current distribution of voting power in the IMF, which favor the long-standing dominance of the U.S. and Europe, threw into question the Fund's legitimacy.

Emerging market countries like China, India, Brazil and Russia have long called for a greater stake in the IMF to properly reflect their increasing clout in the world economy. But member countries have squabbled for years over how to make it happen and at what countries' expense.

The report, requested by IMF Managing Director Dominique Strauss-Kahn, documents the views of the civil society groups on ways to modernize the IMF and make it more effective in overseeing the stability of the global financial system.

Calls to improve the effectiveness and legitimacy of the Washington-based IMF have increased in the wake of the world financial crisis that has pushed the world into recession. The Fund has approved billions of dollars in emergency loans into countries whose economies have been hard hit by the turmoil.

"Over time, the scope of IMF operations has widened and so too has the need for involving stakeholders, beyond the restricted circle of central bankers and senior finance ministry officials, who know and understand the institution well," the groups said.

The report called for changes in the way the head of the IMF and his deputies are selected, saying the process was inconsistent with the multilateral nature of the institution.

Since the Fund's inception after World War Two, the head of the IMF has always been a European, while the president of the World Bank has always been an American.

The groups said it was time to discard the practice and select the head based on credentials, not nationality.

"The election or appointment of the IMF senior management should be with no restriction as to the nationality of the candidates," the report said.

The groups said the effectiveness of the IMF's 24-member executive board had never been evaluated despite its pivotal role in decision making.

They said member countries should establish a committee with the sole responsibility of reviewing the performance of the board, including periodic independent evaluations.

"About one third of the chairs are held by European countries, thus leaving little room for members from other regions to thoroughly contribute to the deliberations," the report said.

They also urged the IMF to establish a whistle-blower protection policy for its staff and said the IMF's watchdog group, the Independent Evaluation Office, should report to finance ministers and not the board.

The groups welcomed recent streamlining of IMF conditions attached to its loans but said more should be done to ensure the Fund's policy advice to member countries does not hurt the poor.

(Reporting by Lesley Wroughton; Editing by Bernard Orr)