New IMF Head Challenged on Reform Pledge

ActionAid UK

As the International Monetary Fund announces its tenth successive European to head up the agency, anti-poverty agency ActionAid challenges Dominique Strauss-Kahn to push for fundamental democratic reform at the institution.

"The poorest countries in the world have for too long been the victim of the IMF's unpopular efforts to impose controversial economic reforms," said Sandeep Chachra, head of governance at ActionAid. "It's time to democratize the IMF and give poor countries their say in the running of this powerful institution."

Frenchman Strauss Kahn's election 'manifesto,' published earlier this month, supported limited proposals for reform but the undemocratic process leading to his selection, has weakened his credibility, said ActionAid. "He can only redeem
himself in the eyes of the poorest countries most affected by the IMF, by vigorously supporting fundamental reform," said Chachra.

"The IMF has chosen to ignore the demands of developing countries such as Brazil and South Africa, who called for an open and merit-based selection process for the leadership," said Specioza Kiwanuka, Director of Programmes at ActionAid Uganda.

"The tawdry carve up of top posts between the IMF and World Bank by Europe and the US must end. He must be the last IMF Managing Director to be selected by Europe."

ActionAid believes the IMF is losing all credibility among developing countries because of its poor track record and practice of imposing controversial economic reforms. More and more developing countries are voting with their feet by repaying IMF loans early and taking on riskier, more expensive debt just to escape its clutches

ActionAid has campaigned for fundamental reform of the IMF. As well as supporting an open, merit-based selection process of its top executives, ActionAid has also called for a shift to a 'double majority' voting system - where all decisions would be approved by a 'one country one vote' system as well as the current 'one dollar one vote.'

ENDS

Note:

The double majority voting system referenced by ActionAid involves securing a majority decision on the basis of one country one vote (the mechanism for voting at the United Nations), and a voting system where shares are distributed according to the size of the country's economy (the mechanism used at the IMF and the World Bank).

The double majority system allows poor countries to have more voice at the IMF. If voting is only based on economic size, poor countries will remain insignificant.

For example, the United States, the world's biggest economy, controls over 16% of the votes at the IMF. In contrast, 43 African countries only have a combined vote of 4.33% while Germany has 5.88%, France has 4.86% and the United Kingdom has 4.86%.

The voting system at the IMF has become perverse. Poorer countries using the IMF have little or no voice at the institution. Rich countries, however, NOT needing the IMF, have most control over votes.

ActionAid is an international anti-poverty agency working in over 40 countries, taking sides with poor people to end poverty and injustice together.