One of the tasks for the G20 Summit in London is the reform of the IMF and the World Bank, key global institutions to help address the current crisis and to prevent the occurrence of future crises. Reform of the IMF is more urgent both in the short and medium term while reform of the World Bank, although equally important, is less pressing.
The G20 faces a few immediate priorities related to the IMF: First, G20 leaders should agree to triple IMF resources from the current level of $250 billion to $750 billion to help meet the financing needs of developing countries. This is critical because the World Bank has estimated that these countries may face a shortfall of up to $700 billion in 2009 alone. Second, G20 leaders should request that the IMF monitor and report transparently on the commitments and implementation of G20 national stimulus plans and efforts to repair their banking sectors. Third, G20 leaders should commit to a far-reaching reform of the IMF by 2010.
While this third step may seem like a lesser priority for leaders as they face a global recession, reform of the IMF must be accomplished in order to restore the legitimacy and effectiveness of the institution. Reform would introduce the merit-based selection of the head of the IMF, irrespective of nationality, eliminate the veto of the U.S. in key decisions and would broaden the application of double-majority voting as a way to increase the role of smaller members. It would also substantially revise the rule of quota and vote distribution to reflect accurately and fairly the current and future economic weight of the members.
Reform would also transform the current IMF’s Board of Directors from a bureaucratic body to a high-level policy decision-making forum of ministers. Many of these measures were proposed by a committee chaired by Trevor Manuel, Minister of Finance of South Africa, which comprised a distinguished cast of international experts. The G20 should endorse those recommendations in full.