2006 was a watershed year for reform of the International Monetary Fund. It began a serious reform process following statements from the US Treasury of
its support for a change in the IMF's voting structure at the end of 2005,1 and warnings from the Governor of the Bank of England in early 2006 that the Fund lacked legitimacy without adequate representation for large developing countries.2 The process was designed to address critical legitimacy questions about the IMF, whose authority was weakened by a combination of three things: the accumulation of massive foreign exchange reserves in Asian and other emerging market countries which made 'self-insurance' against financial crises possible, early repayments of loans by the Fund's largest borrowers such as Brazil, Argentina, Turkey and the Philippines, which made its business model look insecure, and the inability of the Fund to address matters of pressing international concern, such as global imbalances.
At the spring meetings in April 2006, the International Monetary and Finance Committee (IMFC) of the International Monetary Fund declared that: 'the IMF's effectiveness and credibility as a cooperative institution must be safeguarded and its governance further enhanced, emphasising the importance of fair voice and representation for all members.'3 They asked for the preparation of further concrete reform proposals by the time of the Annual Meetings of the IMF and World Bank, which were to take place in September of that year.
In response, the IMFC adopted a programme of reforms aimed at adapting quotas and voice within the institution, which were to be completed by the Annual meetings of 2008, at the latest. The communiqué from the meetings stated that: '...this package of reforms, when implemented, would make significant progress in realigning quota shares with members' relative positions in the world economy and, equally important, in enhancing the participation and voice of low-income countries in the IMF as set out in the resolution.'4 The ball was set in motion for the most significant reform of the governance of the IMF in decades, something which even a few years ago would have seemed a near impossibility.
Footnotes:
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Timothy D. Adams, US Department of the Treasury: Speech at the Institute for International Economics, 23 September 2005: Washington DC.
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Mervin King, Governor of the Bank of England: Speech at the Indian Council for Research on International Economic Relations (ICRIER), 20 February 2006: New Delhi,lndia.
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Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund: April 22, 2006.
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Communiqué of the Intemational Monetary and Financial Committee of the Board of Governors of the International Monetary Fund: September 17, 2006.
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