Necessary reforms to the quota-allocation formula at the International Monetary Fund and the voting-rights system at the World Bank will likely be difficult and time-consuming. In the meantime, these institutions' boards of directors can and should be modernized, in line with best practices in corporate governance.
WASHINGTON, DC – Efforts to reform the Bretton Woods institutions – the International Monetary Fund and the World Bank – are progressing, albeit slowly. In December, the IMF Board of Governors approved a 50% increase in member quotas, which will reduce its reliance on borrowed resources, and the World Bank has released an ambitious “evolution roadmap,” which sets a path toward modernizing its mission, business model, and funding. But while these are welcome developments, they are not enough. Reforming these institutions’ governance structures is crucial.
The current governance structure gives an outsize voice to creditor countries – mostly in Europe – and an insufficient voice to emerging-market and developing economies, despite their increasingly substantial role in the global economy and financial system. This is nothing new: among those who have called for reforms to correct this imbalance is United Nations Secretary-General António Guterres. And a new report by the Brookings Institution advocates for changes to the quota-allocation formula at the IMF and the voting-rights system at the World Bank.
But such reforms will most likely be difficult and time-consuming. In the meantime, reforming the IMF and World Bank boards of directors according to best practices in corporate governance would go some way toward making these institutions fit for purpose. Changes are needed in six key areas.
WASHINGTON, DC – Efforts to reform the Bretton Woods institutions – the International Monetary Fund and the World Bank – are progressing, albeit slowly. In December, the IMF Board of Governors approved a 50% increase in member quotas, which will reduce its reliance on borrowed resources, and the World Bank has released an ambitious “evolution roadmap,” which sets a path toward modernizing its mission, business model, and funding. But while these are welcome developments, they are not enough. Reforming these institutions’ governance structures is crucial.
The current governance structure gives an outsize voice to creditor countries – mostly in Europe – and an insufficient voice to emerging-market and developing economies, despite their increasingly substantial role in the global economy and financial system. This is nothing new: among those who have called for reforms to correct this imbalance is United Nations Secretary-General António Guterres. And a new report by the Brookings Institution advocates for changes to the quota-allocation formula at the IMF and the voting-rights system at the World Bank.
But such reforms will most likely be difficult and time-consuming. In the meantime, reforming the IMF and World Bank boards of directors according to best practices in corporate governance would go some way toward making these institutions fit for purpose. Changes are needed in six key areas.