Thursday, October 23, 2014

Targeted Discussion Tool for the High-Level Panel on IMF Board Accountability


This project will focus on the Board and its accountability. Therefore, two sets of questions must be addressed:

  1. What is the Board responsible for?
  2. To whom is the Board accountable?

A third set of questions may need to be addressed, namely, how can the Board become more effective in accomplishing its responsibilities? This second tier question can raise issues of legitimacy or representation, the size of the Board, the personal capacity of the Board members. However, the primary tasks will be addressing those first two questions.

In this exercise, you are asked to re-read the Articles of Agreement with fresh eyes, and then to identify

  • First, what the Board currently does to accomplish the business of the Fund,
  • Second, how the Board is currently held accountable, and
  • Third, how the Board’s accountability could be enhanced.

Question 1: What is the Board of Directors responsible for?

To address what the Board is responsible for, it is appropriate to focus on two principal Articles of the Articles of Agreement: Article I, the Purpose of the IMF, and Article XII, on Organization and Management of the institution. Article I states:

Article I – Purposes

The purposes of the International Monetary Fund are:

(i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.

(ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.

(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.

(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.

(v) To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

The Fund shall be guided in all its policies and decisions by the purposes set forth in this Article.

The Articles are the basic Constitution of the Fund. The specific ways in which the Fund implements these responsibilities have evolved over time.

The website of the IMF identifies three key purposes or duties of the Fund:

The work of the IMF is of three main types. Surveillance involves the monitoring of economic and financial developments, and the provision of policy advice, aimed especially at crisis-prevention. The IMF also lends to countries with balance of payments difficulties, to provide temporary financing and to support policies aimed at correcting the underlying problems; loans to low-income countries are also aimed especially at poverty reduction. Third, the IMF provides countries with technical assistance and training in its areas of expertise. Supporting all three of these activities is IMF work in economic research and statistics.

In recent years, as part of its efforts to strengthen the international financial system, and to enhance its effectiveness at preventing and resolving crises, the IMF has applied both its surveillance and technical assistance work to the development of standards and codes of good practice in its areas of responsibility, and to the strengthening of financial sectors.

These activities of the Fund need to be compared with the purposes of the Fund found in Article I. Interpretations of the differences between the current agenda of the Fund and the earliest articulation of its purposes will generally fall into two camps, what might be called the “strict constructionists” and the “broad constructionists.” Given the movement away from the gold standard, and expanding the agenda of the Fund beyond short-term trade imbalances, the “broad constructionists” apparently have carried the day. The work of the Fund on growth and poverty reduction and its expanding work into the financial sector are clearly indicative of an institution that adapts to changing financial realities.

The responsibilities of the Board with regard to these purposes are described briefly in Article XII.

Article XII – Organization and Management

Section 3. Executive Board

a) The Executive Board shall be responsible for conducting the business of the Fund, and for this purpose shall exercise all the powers delegated to it by the Board of Governors

f) Executive Directors shall continue in office until their successors are appointed or elected.

Section 4. Managing Director and staff

a) The Executive Board shall select a Managing Director…The Managing Director shall cease to hold office when the Executive Board so decides.

(Cf: Article XII, Section 2. (i): The Board of Governors shall determine the remuneration to be paid to the Executive Directors and their alternates and the salary and terms of the contract of service of the Managing Director JMG.)

b) The Managing Director shall be chief of the operating staff of the Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the Fund. Subject to the general control of the Executive Board, he shall be responsible for the organization, appointment, and dismissal of the staff of the Fund.

In brief, the Board of Directors is responsible for all the business of the Fund, as delegated to it by the Governors. Hence, in reading the statement of Purpose in Article I, or throughout the Articles of Agreement, any reference to the activities of the Fund is, in effect, a reference to a responsibility of the Board of Directors.

Further, the Board of Directors is responsible for the election of the Managing Director, who serves at the will of the Board of Directors. In an apparent inconsistency, the Board of Governors is entitled to stipulate the terms of the Managing Director’s contract. The Board of Governors, in the By-laws, set age limitations and restricted the Managing Director to serving no more than two terms of five years each.

The Board of Directors is also responsible for over-seeing the hiring and performance of staff, who first must be of the highest caliber and second should reflect geographic diversity.

Question 2: To Whom are the Executive Directors Accountable?

According to Article XII, the Executive Directors are selected by the Governors. There is no indication of how they can be removed. They are to serve for a two year term, and can be reelected. Practice has evolved that an ED can be removed by the Governors that elected him/her. Such practice is not anticipated in the Articles.

Since the Articles are silent on the accountability of the Executive Directors, two lines of analysis follow.

The first is the “chain of responsibility” or “chain of representation” approach. The Executive Director is responsible to the Governor(s) who appointed or elected him/her; the Governor(s) are responsible to the Executive Branch they serve; the Executive Branch is responsible to the Parliament; and the Parliament is responsible to the citizens who elect them.

This chain presupposes clear communication from the Executive Directors to those who appointed or elected them. It also assumes that those who appointed or elected can remove. This relationship assumes knowledge of the actions of the Executive Directors and the opportunity to evaluate their performance.

The second line of analysis appears when this “chain” is broken. The chain can be structurally deficient when the Executive Director is appointed or elected by Governor(s) who are not answerable to a Parliament, or the Parliament is not answerable to the electorate. So too the chain can be functionally deficient. That is, little or no information flows between the Executive Director and the government(s) and people he/she represents. Further the government(s) and or Parliament(s) may not be informed regarding what the Executive Director does or why he/she does it. The bottom line is that people who are affected by decisions supported by the Executive Director have no recourse. They do not know who is responsible, nor why; and if they are harmed who will provide explanations, or recompense, or lose his/her job?

Accountability thus implies clear lines of responsibility, information flows and evaluation of performance.

Not only should the Executive Director be evaluated for the performance of his/her duty, but the Executive Board in turn is responsible for ensuring the quality of the Managing Director, the staff overall, and the quality of the advice, research and statistics the organization disseminates or generates.

Has the Executive Board made reasonable provisions

  • To monitor MD and staff performance?
  • To monitor the quality of IMF policy advice and technical assistance?
  • To ensure the accuracy of statistics?

Are these provisions sufficient to ensure the purposes of the Fund are accomplished?

Note: Additional material will be provided in mid-August on contemporary standards of accountability for intergovernmental organizations.

At this point, you are invited to complete the chart sketched out below. The columns identify the key functions of the IMF. The rows await your identification of mechanisms of accountability—current mechanisms and mechanisms you would propose. (The list that follows the chart are ideas that I have encountered; please do not be constrained by these suggestions. JMG)

IMF Board Accountability: Is and Ought

Purposes of  the Fund Surveillance

Prevent global financial crises:

e.g., Standards and Codes, FSAP, etc.

Lending: Trade imbalances,

Short term BOP—Advice and Conditions


Reduce Poverty; longer term imbalances; reduce debt—Advice and Conditions

Technical Assistance Research Statistics

In Developed Countries:



Accountability as it could be
In Middle Income Emerging Markets: Accountability Now
Accountability as it could be
In  Less developed or LICs:  Accountability Now
Accountability as it could be
In Fragile or Failing states:  Accountability Now
Accountability as it could be















The wide range of reading materials that have been provided offer few suggestions on how to make the IMF Board of Directors more accountable. Possible actions could include:


  • Annual public meetings in each country in the constituency with the National Parliament, or if there is no operating Parliament, then with the media, and civil society organizations
  • Annual meeting of ED with all Finance Ministers in the constituency. This could be public.
  • Annual meeting with a mixed group of MPs representing all the countries in the constituency. This could be public
  • Transcript of Board meetings released after 3 years
  • Release of Minutes after 6 weeks
  • Release of Board votes every two weeks (Articles indicate decisions are to be made by votes; majority wins; no reference to consensus)
  • Public release of ED statements as well as voting positions
  • In cases where the chain of representation is broken: Persons harmed by Fund policies can complain to an Ombudsman (See Bradlow article.) and achieve compensatory payments
  • Persons harmed by Fund policies can require the ED to explain the policy; if the government cannot/does not endorse the ED’s position, the ED can be fired, or reprimanded.
  • Persons harmed by Fund policies can appeal to an international body such as the International Court of Justice
  • The Board regularly evaluates the performance of the Managing Director and other Senior Managers
  • The Board regularly evaluates the effectiveness of IMF policy advice to achieve the goals it was allegedly designed to achieve. (i.e., evaluate the quality of IMF advice)
  • The Board regularly evaluates the quantity of funds loaned and the speed with which they were released, and modified those amounts and timing.
  • The IMF becomes a “learning institution” (see Angela Wood in Accountability of the IMF, Carin and Woods, editors)

Tertiary Question

To enhance the ability of the Executive Board to fulfill its responsibilities, would it matter if:
  • The Board were smaller?
  • Not resident in Washington?
  • The Board reflected a better distribution of quotas?
  • No country had a veto?
  • There were provisions for “double majority”?

Would such provisions enhance the accountability of the Executive Board?

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