News and Update: No surprise, Strauss-Kahn takes the helm of the IMF

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Update from Bank Information Center (BIC)

The International Monetary Fund (IMF) today announced that Dominique Straus-Kahn will take over as managing director of the IMF beginning November 1, 2007.

The International Monetary Fund (IMF) named France’s Dominique Strauss-Kahn its new managing director this afternoon. The announcement followed a two-stage vote by the IMF’s Executive Board, which included a secret straw poll followed by a formal vote and resulted in a consensus vote for Strauss-Kahn. He will succeed outgoing managing director Rodrigo de Rato beginning November 1, for a five-year term. Given the fact that he had the unanimous backing of the 27-nation European Union and the United States, Strauss-Kahn’s victory was “virtually assured.” Strauss-Kahn pledged to be a “consensus-builder” between developed and developing country representatives in the Fund’s governing bodies, in order to address the IMF’s legitimacy, relevancy, and financial crises.

While the IMF’s leadership announcement has been illustrated by the media as an event that will “help restore credibility lost in recent years,” it is important to re-emphasize that the process of the Fund’s leadership selection was not conducted in a manner that is merit-based, transparent, and democratic. Although Russia nominated Czech national Josef Tosovsky, which marked a break from the decades-long tradition of the IMF chief being picked by Europeans and approved by the U.S., the process was not adequately competitive, and there were no proposals by or for developing country representatives.

In the last one week, the two candidates have been interviewed by the Fund’s Executive Board at its Washington, D.C. headquarters, where both candidates presented statements. Josef Tosovsky stated that the quota, voice, and vote reforms undertaken a year ago during the IMF-World Bank annual meetings in Singapore were merely a “down payment” on the governance changes necessary in the Bank. According to Tosovsky, surveillance is the “bread-and-butter work of the Fund,” and is central to its medium-term strategy because “only the Fund” can integrate bilateral, regional, and global surveillance. Tosovsky also noted that it is premature to think that IMF lending is irrelevant, but admitted that the Fund should regularly re-examine whether its facilities continue to meet the needs of its members in the fast-paced changes of the global economy.

Strauss-Kahn stated that the task of the next IMF leader is clearly to rebuild the credibility and efficiency of the Fund. Surveillance activities need to strengthen its focus on “financial sector stability,” while lending instruments need to be “modernized.” Conditionality, according to Strauss-Kahn, should be “reconsidered” with regards to the most relevant aspects for any particular program. He reaffirmed that the Fund should remain involved and committed in low-income countries by working closely with other partners, particularly the World Bank. He also stressed that the Fund’s legitimacy goes well beyond quota reforms in its governance structure, and highlighted his endorsement of a double majority voting system, where votes are measured by both quotas and chairs. Strauss-Kahn also noted that the IMF’s staff needs to adapt to a changing world, among other things by hiring those from regions underrepresented in the staff. He admitted that it was “ironic that both candidates today are Europeans,” and stated that he did not want to be “the candidate from the North against the South or from the wealthy against the poor.”

Resources:

Follow the IMF leadership selection process on the IMFleadership blog (IFIWatchnet website)

Strauss-Kahn named to head IMF, IMF Survey Magazine, September 28, 2007 (IMF website)

Statement by Dominique Strauss-Kahn to IMF Executive Board, September 20, 2007 (IMF website)

Statement by Josef Tošovský to IMF Executive Board, September 19, 2007 (IMF website)

Transcript of press conference by Masood Ahmed, Director of the External Affairs Department, IMF, September 20, 2007 (IMF website)

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