The governance of the IMF: how a dual board structure could raise the effectiveness and legitimacy of a key global institution

Abstract

The International Monetary Fund is currently engaged in a reform process to update its activities to the challenges of economic globalisation and establish it firmly as the central institution for international monetary cooperation. Yet, the current reforms may miss this aim because they do not foresee adjusting IMF governance so as to allow the Executive Board to become a forum for true international economic dialogue. Without such a change in governance, however, such economic dialogue is likely to continue moving outside the IMF, and spread in fora such as the G7, G20 or others that do not have universal status. This paper lays out a new proposal to adjust governance to make the IMF more effective in this area. It proposes to create a new smaller Board to deal with global economic issues of a systemic nature, and enlarge the current Board to make more room for developing countries, focusing it on country-related and technical matters, including bilateral surveillance and structural adjustment lending. The implementation of a dual Board structure is obviously challenging from an institutional point of view, and the paper discusses these challenges in detail. Yet, it would allow the IMF to be more effective and carry greater legitimacy vis-à-vis developing economies and at the same time play a more central role in international economic consultation and cooperation that in recent years has increasingly drifted towards the G-groups such as the G7, G20, G24 and other fora