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Christine Lagarde wins top spot at IMF
Almost 48,000 ONE members signed our petition urging the International Monetary Fund (IMF) to run an open, transparent and merit-based process for their top position — but now the results are in. This week, the IMF’s executive board announced that they have chosen Christine Lagarde of France to succeed Dominique Strauss-Kahn as the managing director of the IMF.
As the IMF’s first female managing director, Ms. Lagarde will have one of the most powerful positions in global finance. She will be in charge of working with the IMF’s member nations to foster global monetary cooperation, secure financial stability and reduce poverty around the world, among other things. Her candidacy has won the support of several key African nations, including the Ivory Coast and the Democratic Republic of Congo.
Before coming to the IMF, Ms. Lagarde was the finance minister of France, one of Europe’s most powerful economies, and has been at the forefront of containing Europe’s debt crisis. This experience will serve her well, as she’ll be expected to guide the IMF through these tough economic times at the same level as her predecessor.
“I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit,” she said in her first official IMF statement. “As I have had the opportunity to say to the IMF Board during the selection process, the IMF must be relevant, responsive, effective, and legitimate, to achieve stronger and sustainable growth, macroeconomic stability, and a better future for all.”
And when she says “future for all,” she also means Africa — which we were very pleased to hear. In her statement to the IMF board as a candidate, she said that one of the IMF’s key guiding factors should be to enhance its responsiveness to the needs of low-income countries, especially those in Africa.
She has also made it known that the IMF should strive to be even more diverse. “There should be appropriate and proportionate representation at staff level to express and respect both diversity and universality,” she said during her candidacy.
We welcome Ms. Lagarde for her efforts to fight global poverty — but she should know that we’ll be watching her to make sure that she keeps the promises she made to Africa, diversity and the world’s poorest people.
Even unwritten rules have consequences
Ever since the May 18th resignation of Dominique Strauss-Kahn as managing director of the International Monetary Fund (IMF), speculation has swirled over who will be chosen to replace him as the head of the IMF. You may have even signed our petition already. ONE and other organizations like Oxfam and ActionAid are campaigning for an open, merit-based process when this important choice is made. The IMF itself endorsed this process, agreeing in 2009 “that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent, and merit-based selection process,” so this should be a no-brainer, right? The unwritten rule that the IMF’s managing director is European, while the president of the World Bank is American, puts the organisations at a disadvantage by disqualifying many qualified candidates.
It’s important that whoever is chosen to lead the IMF, they be qualified to face the challenges the IMF will tackle in the very near future — from the debate over how to deal with Greece’s economic crisis to completing a series of ongoing reforms meant to boost the voice of emerging countries in the IMF.
With so much going on in Europe and elsewhere, it’s important that issues that affect developing countries are prioritized. At the Pittsburgh G20, developing countries were promised more equitable representation in the IMF, and the IMF committed to governance reforms.
Commitments made by the IMF in November 2010 include reforms of the representation of “dynamic emerging market(s) and developing economies” to increase by 6 percent while at the same time preserving the voice of the poorest developing nations. These reforms will be fully implemented by Autumn 2012 and it is critical that the new managing director embraces the changes and continues to advocate for the world’s poorest countries. In addition, the new head should continue to push an agenda of transparency and rigorous evaluation to assess the impact of IMF policies on developing countries.
Finally, one of the first tasks for the new IMF head will be to endorse that windfall profits from the IMF’s gold sale be mobilized to support the world’s poorest countries. In April 2008, the IMF decided to sell more than 400 tons of the Fund’s gold. Due to skyrocketing gold prices, the IMF earned $2.8 billion more than it expected. That $2.8 billion should be used to give low-income countries low or no-interest loans, keeping in mind their debt sustainability.
The world may have an answer as soon as this week to the IMF question. Regardless who is selected next to lead the IMF, we hope that they are chosen in an open, merit-based process and keep the developing world firmly on the IMF agenda.
Photo of the Washington, D.C., IMF building courtesy of Wikimedia commons.
Tell the IMF to give all candidates a fair shot at the top spot
It’s been hard to miss the news: the International Monetary Fund (IMF) is looking for a new boss (as Dominique Strauss-Kahn recently resigned). And they’re planning to fill the position very, very soon.
In the past, this job (along with the top World Bank position) has been a bit of a gentleman’s agreement’ between Europe and the US—so a European usually gets this top IMF job. But this time let’s make sure the IMF knows that we expect an open and merit-based process that gives everyone a fair shot at the top spot.
The petition reads:
Dear IMF Executive Directors,
Please run a fair, transparent and merit-based process while looking for a new head of the IMF so that the best candidate, regardless of nationality, wins this crucial job.
So why is this such a big deal? Because the IMF sets key global economic policies that impact the world’s poorest people (take debt relief, for instance). And way back in 2009, after being pressed by groups like ONE, the IMF agreed that the next head would be selected by an “open, merit-based, and transparent” process—and the US Treasury Secretary said the same. We really hope those words are true. But we’ve seen them swayed by powerful countries in the past—and the world has changed too much for history to repeat itself.
That’s why we’ve started this petition. It’s our way of letting the IMF know that we’ll be watching for an open process and that we can’t limit this search to just 1/7th of the world. As former South African Finance Minister Trevor Manuel so aptly said, this is not a time for birthright to be more important than ability. The world—and ultimately lives—could depend on it.
Let’s make sure the person who’s named to the IMF job truly represents all interests—and all corners—of the globe.
May the best candidate win!
Dr. Sipho S. Moyo
Africa Director, ONE
Developing country voting rights boosted at IMF
The G20 Finance Ministers meeting in South Korea over the weekend have come to an agreement on voting right reform at the International Monetary Fund (IMF). The IMF will transfer power to under-represented emerging economies such as Brazil, China and India, although there is no indication African countries are set to benefit. About 6% of the voting rights will be transferred, although the US will retain its veto by continuing to hold 17% of votes in a forum where 85% approval is needed for key decisions.
The move does, however, send a strong message about the future of the G20. Analysts predict the Group will now be more willing to address issues like trade distorting protectionism, an important move as the Doha trade talks continue at a glacial pace. A deal on agricultural subsidies, for example, would open up Western markets to African exports.
As preparations continue for the Seoul Heads of State meeting in a little under two weeks time attention will now turn to the findings of the Development Working Group, a committee set up by the G20 to come up with new ideas on pro-poor inclusive economic growth.
Help Freeze Pakistan’s Debt
I’m sure like me you’ve been saddened to see the unprecedented floods in Pakistan, and I’m sure you are keen to find a way to help.
The sheer scale of the disaster is staggering, with reports suggesting that 20 million people have been affected. This is doubly devastating in a country where 60% of the population was already living below the poverty line.
Pakistan will need all its available resources to help it recover from this crippling crisis and to fight long-term poverty. The International Monetary Fund (IMF) – the institution that oversees debt repayments – can play a key role in this. It is currently considering ways in which Pakistan’s debt can be eased, and how to make sure the money is effectively used to help people affected.
Please ask the IMF to freeze Pakistan’s debt repayments for the next 2 years. Sign our petition to Dominique Strauss-Kahn, Managing Director of the IMF.
Petition text:
Please help freeze Pakistan’s debt to ensure the country’s poorest people are able to recover from the devastating floods.
Early this year ONE members helped to get Haiti’s debt cancelled after the earthquake. We can now make a difference for the people of Pakistan giving them the greatest possible help to recover from this devastating disaster.
African Economic Outlook
The global financial crisis slashed economic growth in Africa from an average of 6% in 2006-2008 to 2.5% in 2009. High levels of population growth meant per capita economic growth in 2009 was at a standstill across the continent. These are the stark findings of the African Economic Outlook report for 2010, a joint production of the African Development Bank, OECD and UN Economic Commission for Africa released on Monday.
They do, however, predict a return to healthier growth of 4.5% in 2010 and 5.2% in 2011, although there will be marked regional variations with Southern Africa particularly lagging behind. Henri-Bernard Solignac-Lecomte, Head of the Europe, Africa and Middle East Desk at the OECD Development Centre said:
“The good news is that the continent has proved resilient to the crisis. The bad news is that, despite rebounding growth next year, the downturn could make it more difficult for some African countries to meet the development goal of halving the number of people living in poverty by 2015.”
The report adds pressure to the G20 and International Monetary Fund to take into account the damage the recession has caused in Africa when they finalise their recommendations for the financial sector to make a “fair and substantial contribution” to the cost of the crisis. A significant part of any resources generated by new levies on the banks should therefore be clearly earmarked for African development, to ensure that progress towards the Millennium Development Goals (MDGs) is not halted by a problem not of Africa’s making.
In total the Overseas Development Institute estimates Africa lost out on $130billion due to falls in trade, foreign direct investment, remittances and bank lending. For example, in 2009 Africa’s export volumes declined by 2.5%, and falls in commodity prices hit the mining sector.
IMF proposals should take account of Africa’s losses
This year’s IMF spring meetings ended inconclusively at the weekend, with most major decisions deferred until the June G20 summit in Canada. The IMF has been tasked with coming up with recommendations for how the financial sector could make a fair and substantial contribution towards paying for the effects of the economic crisis. However, while good ideas were raised at the weekend on repaying the costs of rich country bailout, there was a disappointing silence on support for African countries.
This is despite the IMF’s own analysis finding that “the global financial crisis greatly compounds the policy challenges confronting the region as it strives to consolidate its economic gains and meet the Millennium Development Goals (MDGs)”.
ONE’s European Director Oliver Buston responded by highlighting the need for the IMF to take account of Africa in their recommendations:
“Countries in Africa that did nothing to cause the crisis are estimated to have lost $130billion due to falls in trade, FDI, remittances and bank lending. The IMF should make clear in their final report to the G20 in June that some of the revenue raised from their proposal on financial activities will be directed to Africa. Africa should not be forgotten when it comes to securing a global recovery.”
ONE will use the next few weeks before the G20 in Toronto to press Africa’s case for inclusion in the IMF’s final report and help ensure that hard won progress on reducing extreme poverty is not undermined.
Africa a big loser if climate finance is not additional
Africa will lose out if money pledged by rich countries at the Copenhagen climate change meeting last December does not come in addition to their existing aid promises. This is the stark message in a research paper from leading development think tank the Overseas Development Institute (ODI), commissioned by ONE.
The report states that if finance for climate change adaptation were to come from existing and promised aid flows it would necessarily result in a money being taken away from health and education, and reallocated to sectors such as agriculture, coastal defence and water.
While sub-Saharan Africa receives 38% of global aid, the World Bank estimates that their share of adaptation needs is 22% – in part because there is less expensive existing infrastructure to protect. ODI conclude that “It is crucial to underline the importance of additionality of climate finance to aid. If this is not explicitly stated and implemented, the possibility of aid diversion allocated according to adaptation needs is likely to lead to the neglect of aid to Africa.”
The findings come just days after Bill Gates warned in his annual letter that health funding could be cut if the $100bn target set at Copenhagen took money out of other development priorities. “If just 1% of the $100bn goal came from vaccine funding, then 700,000 more children could die from preventable diseases” he wrote. If countries do not avoid this type of dangerous double counting, the already off track Millennium Development Goals will be dealt another heavy blow.
The millions of people around the world who took action in the run-up to Copenhagen, including tens of thousands of ONE members, will now be needed more than ever as we attempt to make sure that vital work on climate does not come at the expense of the world’s poorest people.
Read the report ‘Climate financing and Development – Friends or foes?’
Update: The Financial Times today published a letter from ONE’s co-founder and Executive Director Jamie Drummond on this important issue. Read the letter here.
World Bank and IMF keep on keeping on at fall meetings… but is more needed for Africa?
The annual fall meetings of the World Bank and IMF in Istanbul this week focused on the “road to recovery” from the global economic crisis. While we didn’t see major new initiatives emerge from the meetings, the Bank and the Fund reaffirmed important commitments to help emerging market and developing countries cope with the impacts of the financial crisis. These include commitments to ensure the Bank and the Fund have adequate resources to respond to the crisis and timetables for governance reforms that would give greater voice and representation to emerging market and developing countries.
They echoed calls to: protect core spending on health, education, infrastructure, agriculture and social safety nets; revive global trade and investment; and establish a multilateral trust fund at the World Bank for the food security initiative. The World Bank and African Development Bank also announced this week that they would invest $215 million to bring high-speed, low-cost internet access to central African countries.
While important progress is being made at the institutions, some say it’s not going fast enough or deep enough. Nancy Birdsall, at the Center for Global Development, says the newly inclusive G20 is more progressive than the modest changes in governance being proposed at the World Bank and IMF. Several African finance ministers also issued a statement during the annual World Bank and IMF meetings calling for their countries to have a voice in the G-20, and another self-styled “group of 30” financial figures called for much more dramatic reforms at the IMF including ending the U.S. veto power and cutting the number of European board chairs.
We’ll be watching to see how these financial mechanisms and new governance proposals will benefit sub-Saharan African countries.
ONE’s Reaction to the Pittsburgh G20 Communique
Overall, the Pittsburgh G20 Summit appears to have made some progress towards reshaping global power structures to make them more representative, but it still has some way to go before it becomes a truly representative global decision making body.
I spent the summit with our US Government Relations Director Tom Hart, who said:
“Moving from the G8 to the G20 is a seismic shift: it brings many more of the world’s people to the table, but the new expanded world body must now start addressing the needs of the poorest countries, especially in Africa. For nearly a decade now, Africa has been squarely on the G8’s agenda, even if delivery on their commitments has been mixed. During this transition time, African development must not fall through the cracks. One way to show the world will not forget Africa would be to hold an upcoming G20 summit on the African continent.”
As I posted earlier here, we passed our petition, in which 75,000 ONE members worldwide call for a G20 Summit to be held in Africa, to the US delegation at the summit.
Below are some key points in the summit’s communique that are relevant to Africa:
- Agriculture – The G20 called on the World Bank to develop a new trust fund, as a way to implement the G8’s food security initiative announced at the L’Aquila Summit in Italy in July. This multilateral fund will support the set of principles championed by the White House to make aid for agriculture more effective, coordinated and geared towards the strategies developed by poor countries themselves.
- Climate change – The G20 failed to call for resources to help the poorest countries adapt to the harmful impacts of climate change, and tackle its causes. It was disappointing that there was no mention of the urgency of addressing these needs.
- African Development Bank – The G20 have reaffirmed the commitment to make sure the multilateral development banks have enough finance, especially the World soft loan arm, the International Development Association (IDA) and the African Development Bank (AfDB). The African bank has increased its lending to respond to the financial crisis by as much as US$4bn and now needs support to replenish its coffers. ONE welcomes Canada’s announcement of an extra US$2.8bn in loan guarantees for the Bank.
- World Bank and IMF- Both International Financial Institutions took steps towards increasing representation of developing countries.
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TAGS: IMF, ONE, Spotlight