An IMF that works for Africa

Reforms are required to improve IMF governance and its performance in Africa, starting with better African representation and an end to its Euro-centric leadership, writes Daniel D. Bradlow, SARCHI professor of international development law and African economic relations, University of Pretoria and professor emeritus, American University Washington College of Law

The International Monetary Fund has had an ongoing profound and controversial impact on Africa since the debt crises of the 1980s. However, Africa’s participation in IMF governance is not commensurate with the scale and intensity of this impact.

Over the next year, the IMF is expected to complete its 15th review of its quota allocations and its work on governance reforms. This presents Africa with a rare opportunity to enhance its weak role in IMF governance. Success will require the support of the G7 members, given their oversized role in IMF governance.

This support would be most useful concerning three governance issues, none of which requires the G7 members to compromise their positions on the complex quota issues. These are representation on the IMF board of executive directors, the public accountability of the IMF and the selection of the IMF’s managing director.

First, the G7 should actively support Africa’s call for a third sub-Saharan African seat on the IMF’s board of executive directors. Representation on the board is important because IMF operations and policy decisions require board approval. Currently, the 46 countries in sub-Saharan Africa are represented by two executive directors. The fact that Africa is so poorly represented on the board is particularly troubling because African countries are arguably the most intensive consumers of IMF services.

The most feasible way to improve African representation is to establish a third African chair on the board. This will help reduce the workload of each sub-Saharan African director so that they can more effectively advocate for African concerns at the board. In supporting this African demand, the G7 would merely be ensuring that the IMF follows the lead of the World Bank, where sub-Saharan Africa already has a third board chair.

Increased accountability

Second, the IMF needs to become more accountable to all its stakeholders. Given the complexity of its operations, it is unrealistic to expect that the IMF staff will always provide their member states with infallible advice and that they will have sufficient knowledge to attach the best and most effective conditions to their financial assistance. In addition, given the negotiating imbalances between a country in crisis and the IMF, it is unrealistic for the IMF staff and management to maintain that the IMF does not impose its conditionalities on its members. When many African countries approach the IMF for support they have no meaningful alternative source of financing and they are acting under such pressure that they cannot bargain effectively. Consequently, their acceptance of IMF conditions cannot be considered an act of state sovereignty in any meaningful sense.

As is the case with any powerful body in the G7, the IMF should be accountable to those that it affects for the way in which it exercises its power. This means that the IMF should create an independent accountability mechanism that can investigate complaints from communities that contend they have been disproportionately harmed by the IMF’s operations in their home countries. The purpose of these investigations should not be to assign blame, but to prepare independent and evidence-based reports that can be used to educate all IMF stakeholders about how the IMF does business, the actual impacts of its operations and how to mitigate any unavoidable adverse impacts.

This mechanism would differ from the Independent Evaluation Office because its investigations would be initiated by outside requests from adversely affected stakeholders. As the only IMF mechanism to be triggered by affected communities, it would provide the board and management with hitherto unavailable information about its operations.

Third, the G7 should support the call from Africa and other regions to end the practice of the IMF managing director always being a European. The process should become more transparent and competitive. It is not credible to contend that the best candidates are always European or that the current arrangement is the optimal arrangement for the institution. The mere fact that the three European-selected managing directors before Christine Lagarde all failed to complete their terms and all had an ethical problem is a good indication of how flawed the process is.

These three reforms would cost the G7 little but would improve the IMF’s governance and its relations with and performance in Africa.