The IMF is undertaking sweeping reforms of its governance structure to reflect fundamental changes in the world economy that have taken place over the past generation. The IMF has evolved along with the global economy throughout its 67-year history, allowing the organization to retain a central role within the international financial architecture. Unlike the General Assembly of the United Nations, where each country has one vote, decision making at the IMF was designed to reflect the relative positions of its member countries in the global economy. The current reforms are intended to reflect the larger role that emerging market and developing economies now play in the global economy.
The diagram below provides a stylized view of the IMF's current governance structure.
In order to be effective and legitimate, the IMF must be seen as representing the interests of all of its 188 member countries. Reform of the IMF’s governance structure is currently under way in response to rapid changes in the global economy that have seen large emerging market countries take on greater importance.
Reform of the IMF’s governance began in earnest in 2006, when a process to realign members’ quotas and voting power received the backing of the membership. The 2008 quota and voice reform—which provides for ad hoc quota increases for a group of dynamic emerging market countries, as well as measures to enhance the voice of low-income countries—became effective on March 3, 2011.
In October 2009, the IMF’s policy steering committee, the International Monetary and Financial Committee (IMFC), endorsed a call by G-20 leaders to aim for an even more ambitious reform effort, while protecting the voting share of the poorest member countries. On December 15, 2010, the IMF Board of Governors approved the 14th General Review of Quotas, which will double members’ quotas and will result in a further shift of more than 6 percentage points in quota share to dynamic emerging market and developing countries, exceeding what the IMFC had called for. Further, there was also agreement to preserve the gains in the voting power of the poorest member countries achieved in the 2008 reforms. Once in effect, India and Brazil will join China and Russia as part of the top 10 shareholders of the IMF.
The 24-member Executive Board also agreed on a restructuring of the way it operates, paving the way for an increase in the representation of dynamic emerging market and developing countries in the day-to-day decisionmaking at the IMF. Once the quota and governance reforms are in effect, there will be two fewer Board members from advanced European countries, and all Executive Directors will be elected rather than appointed, as some are now. The size of the Board will remain at 24, and its composition will be reviewed every 8 years.
Each member country is committed to using its best efforts to urgently ratify these reforms. The Executive Board completed a comprehensive review of the quota formula in January 2013. The Board of Governors also reaffirmed its commitment to conclude the 15th General Review of Quotas by January 2014.
Board of Governors
The Board of Governors is the highest decision-making body of the IMF. It consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the head of the central bank.
While the Board of Governors has delegated most of its powers to the IMF’s Executive Board, it retains the right to approve quota increases, special drawing right (SDR) allocations, the admittance of new members, compulsory withdrawal of members, and amendments to the Articles of Agreement and By-Laws.
The Board of Governors also elects or appoints Executive Directors and is the ultimate arbiter on issues related to the interpretation of the IMF’s Articles of Agreement. Voting by the Board of Governors may take place either by holding a meeting or remotely (through the use of courier services, electronic mail, facsimile, or the IMF’s secure online voting system).
The Boards of Governors of the IMF and the World Bank Group normally meet once a year, during the IMF-World Bank Annual Meetings, to discuss the work of their respective institutions. The Annual Meetings, which take place in September or October, have customarily been held in Washington for two consecutive years and in another member country in the third year.
The Board of Governors is advised by two ministerial committees, the International Monetary and Financial Committee (IMFC) and the Development Committee.
The IMFC has 24 members, drawn from the pool of 188 governors, and represents all member countries. Its structure mirrors that of the Executive Board and its 24 constituencies. The IMFC meets twice a year, during the IMF-World Bank Spring and Annual Meetings. The Committee discusses matters of common concern affecting the global economy and also advises the IMF on the direction of its work. At the end of each meeting, the Committee issues a communiqué summarizing its views. These communiqués provide guidance for the IMF’s work program during the six months leading up to the next Spring or Annual Meetings. The IMFC operates by consensus and does not conduct formal votes.
The Development Committee is a joint committee, tasked with advising the Boards of Governors of the IMF and the World Bank on issues related to economic development in emerging market and developing countries. The committee has 25 members (usually ministers of finance or development). It represents the full membership of the IMF and the World Bank and mainly serves as a forum for building intergovernmental consensus on critical development issues.
The Executive Board
The IMF’s 24-member Executive Board conducts the daily business of the IMF. The current configuration of the Board dates from 1992, following the expansion of the IMF’s membership to include many former Soviet Union countries. Five Executive Directors are appointed by the member countries holding the five largest quotas (currently the United States, Japan, Germany, France, and the United Kingdom), and 19 are elected by the remaining member countries. Under reforms currently being finalized, all 24 Directors will be elected by the member countries.
The Board discusses all aspects of the Fund’s work, from the IMF staff's annual health checks of member countries' economies to policy issues relevant to the global economy. The Board normally makes decisions based on consensus, but sometimes formal votes are taken. At the end of most formal discussions, the Board issues what is known as a Summing Up, which summarizes its views. Informal discussions may be held to discuss complex policy issues at a preliminary stage.
The IMF’s Managing Director is both chairman of the IMF’s Executive Board and Head of IMF staff. The Managing Director is assisted by four Deputy Managing Directors. The Managing Director is appointed by the Executive Board for a renewable term of five years. The IMF’s Governors and Executive Directors may nominate nationals of any of the Fund’s member countries. Although the Executive Board may select a Managing Director by a majority of votes cast, the Board has in the past made such appointments by consensus.