We would like to fully endorse the call made yesterday by Minister of Finance Winston Dookeran for the small economies of the world to be given a much greater voice in the decision-making of the International Monetary Fund (IMF). The intervention by the Minister of Finance, in a letter to the executive board of the IMF, is particularly appropriate as it precedes by less than two weeks the decision by the IMF's executive board on a new managing director for the institution. The candidates whose names have been put forward for consideration are Christine Lagarde, France's Minister of Economic Affairs and Agustín Carstens, the Governor of the Bank of Mexico, as well as former Deputy Managing Director of the IMF.
Too often, the media houses and wire services from the developed world have positioned the competition to replace Dominique Strauss-Kahn as managing director as a straight fight between Europe and one of the large, strong developing countries such as India, China, Mexico or Brazil.
What Mr Dookeran has done is underline the right of some of the smaller countries to a seat at the governance table. In his letter, Mr Dookeran has placed firmly on the front burner for public discussion the fact that while the IMF has made some significant advances in the last decade, there are still some gaps in the institution's decision making.
Mr Dookeran called for the IMF's long-term and short-term support to take more account of the much higher levels of the fragility and vulnerability to natural and economic shocks in small states than to the current criteria, which seems to pay too much attention to the level of GDP per capita. While the Dookeran call for a new leadership position at the IMF to focus on the challenges of small economies is particularly on point, we would wish to warn the minister that there are some practical difficulties to taking his argument too far. The main difficulty, of course, is in the nature of the IMF itself. Unlike a club or even a national parliament where each representative has one vote, the IMF was designed 65 years ago to reflect the power of the larger, more developed countries in the world.
The basis of this power is the quota that has been assigned to each of the 187 member countries and which determines the voting power of the country as well as its financial commitment to the institution.
Large developed countries, like the United States, Great Britain, France, Germany and Japan, have a preponderant amount of power as a result of their traditional hierarchical positions in the global firmament. This is not to say that the large developing countries have not been able to wring changes in the IMF to make it more representative of 21st century realities. Three years ago, the IMF introduced the 2008 Quota and Voice Reforms which "strengthened the representation of dynamic economies in the IMF while enhancing the voice and participation of low-income countries," according to a statement.
Those amendments to the IMF's Articles of Agreement entered into force in March this year when the proposal was ratified by 117 member countries representing 85 per cent of the IMF's total voting power.
In other words, the process of reforming the IMF has been underway for some time. If Mr Dookeran really wants to be an agent of change at the IMF he should rally support among the world's small nations for the speedy ratification of the 2010 Amendment on the Reform of the Executive Board and the further amendments to quota allocations.
As Mr Strauss-Kahn said in March, these current changes "will represent the most fundamental governance overhaul in the IMF's 65-year history and the biggest-ever shift of influence in favour of emerging market and developing countries." Changes at the IMF have come and will continue to come much more from quiet, intense and sustained lobbying efforts than from periodic statements issued before an international speaking engagement.