Global Policy Forum

By Gumisai Mutume

Washington - While it accounts for a quarter of the 182 members of the International Monetary Fund, Africa only controls about five percent of the vote in the grouping and this needs to be changed urgently African representatives here say. "The voice of the continent should be increased primarily because many of the countries on the continent use Fund resources," says Linah Moholo, governor of the Central Bank of Botswana.

"Another important aspect is that there also has to be representation of the countries in the developing world which are making a contribution to the Fund because it's not only countries in the developed world that provide resources to the Fund," says Moholo whose country has among the strongest economies on the continent. "There are also countries in Africa who do so." The World Bank and IMF are meeting here for their annual Spring meetings, attempting, among other things, to see how they can transfer "real resources" to developing countries. The meetings primarily involve two internal committees -- the International Monetary and Financial Committee (IMFC) and the Development Committee, officially known as the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund.

One of the recurring themes at this year's meetings is the reform of the Bretton Woods institutions - towards more transparency and more democratic governance. Some radical views are even calling for the scrapping of the organisations. There is also a growing voice of concern in developing countries that while the Group of Seven (G7) industrialised countries plus the rest of the European Union only represent 14 percent of the world population they wield 56 percent of the voting power on the executive board of the IMF.

Under the system currently in operation, IMF votes are proportional to quotas which in turn are linked to a country's weight in the global economy.

"The IMF is not a revolving fund as its staff like to claim, but a financial institution comprising structural creditors who dictate loan conditions and structural debtors who accept the said conditions," notes Oxfam in a media brief for the Spring 2000 meetings. There is also a perception in many developing countries that the IMF suffers from the excessive influence of the US treasury. "While it is inevitable that the major shareholder will carry more weight than others, restricting the vote of any one country to 10 percent would help to correct the current imbalance," says Oxfam.

"Recent moves towards a more inclusive structure have been derisory. For instance, the initiative to create a Group of 20 systematically significant economies in the Interim Committee still leaves the poorest countries without an effective voice and it is unclear that the G20 countries have any real say in developing Fund strategies," the London-based non-governmental organisation says. The G20 is a new informal mechanism that had its inaugural meeting in Berlin in December last year. African countries have also expressed concern about the Meltzer Report, released last month to the US Congress and which among other things, recommended that the IMF become a lender of last resort and even then, should lend money to countries for no more than 120 days.

The study was commissioned by the US Congress last year and was headed by Alan Meltzer, a Carnegie Mellon University professor. It says the Fund should only make loans available to nations that are financially sound and it should charge a penalty rate of interest. The Meltzer Report also claims that instead of promoting economic growth, the IMF institutionalises economic stagnation, and that the World Bank is irrelevant to the goal of poverty reduction. It notes that the work of the two bodies is dominated by the influence of key economic institutions in the G7 and in the case of the IMF, the US government.

Cote D'Ivoire Finance Minister N'golo Coulibaly says a report of such importance should not have been written without consulting the major constituency of the Bretton Woods institutions - that is the African countries who stand to lose from the trimming of the functions of these institutions. In response to calls for more consultation, the IMF's concessional lending scheme was broadened last year to include an explicit focus on poverty reduction. As a result, the IMF and World Bank will support strategies adopted by a borrowing country in a Poverty Reduction Strategy Paper which will be prepared with the participation of civil society and other development partners.

The IMF established the Poverty Reduction and Growth Facility (PRGF) to replace the Enhanced Structural Adjustment Facility, targeting 80 of the world's poorest countries. Under the PGRF the World Bank will provide development financing and advise authorities in the design of poverty alleviation strategies while the Fund will advise on prudent macro-economic policy, structural reforms in related areas such as exchange rate and tax policy, better fiscal management and budget execution.

"All the formulas that have been tested to date have faced limitations because they have not made it possible for Africa to take strong steps along the path of sustained and vigorous growth," says Konan Banny, governor of the Bank of West African States.

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