AFRICA has again kicked against its poor representation in the International Monetary Fund (IMF). The renewed quest for more power for the continent in the IMF decision-making process is being pursued by the African leaders at the Bretton Woods Institution’s 24th meeting in Washington DC, United States (U.S.).

The forum is also part of the yearly meeting of the IMF/ World Bank Group.

The 21-member African Group, which at present has only two chairs, wants the number raised to three in the IMF Executive Committee.

They also want their demand met by December 31, 2011 under the implementation of the Quota and Governance Reforms of the IMF initiated in 2008.

Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, who represents the African Group at the on-going meeting, in a statement issued by the group yesterday in Washington DC, said the continent deserves three executive directors in the IMF board.

She said since Europe has agreed to relinquish such positions in the interest of the emerging economies, sub-Sahara Africa should benefit from the proposed arrangement by having a third chair in the IMF Board.

Okonjo-Iweala, who doubles as the Co-ordinating Minister of Nigeria’s Economic Team, said with a third chair, Africa would have better representation in the IMF decision-making body.

At present, the African Region Group has only two chairs, represented by executive directors in the executive board. Nigeria, South Africa and Angola have one executive director, with the third executive director representing the remaining 18 African members of the Fund. This is against the situation for European nations, which almost have one executive director for the dominant economies in the region.

Members of the African Group of the IMF are Nigeria, South Africa, Angola, Botswana, Burundi, Eritrea, Ethiopia, The Gambia, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Nigeria, Sierra Leone, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.

The subsisting arrangement places Africa at a disadvantaged position as its voice gets drowned by majority of the advanced countries when decisions are taken at the executive committee’s meetings by virtue of its voting rights.

This had elicited calls by the African Region Group for the Governance Reforms since 2008 to create room for the continent with at least one more chair to be at parity as is the case with the World Bank Executive Committee Group quota level.

IMF’s resources are drawn mainly from member-countries’ quota subscriptions, which reflect the relative size of each nation’s economy.

So, the larger a country’s economy in terms of output, the larger its quota. The biggest member of the IMF is the U.S, with a quota of Special Drawing Right (SDR) 37.1 billion (about $56.7 billion), and the smallest member is Tuvalu, with a quota of SDR 1.8 million (about $2.8 million).

A member’s voting power in IMF decisions is largely determined by its quota subscription, which is the maximum amount of financial resources it is obliged to provide to the organisation.

Quotas also have a bearing on the amount of financing a member can obtain from the IMF (its access limit). When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members that are broadly comparable in economic size and characteristics. The IMF uses a quota formula to guide the assessment of a member’s relative position.

The IMF has used purchasing power parity (PPP) – adjusted Gross Domestic Product (GDP) measures – in its World Economic Outlook since 1993 and, recently, as an element of the formula used to guide decisions on the distribution of its quotas.

Mrs. Okonjo-Iweala, who spoke for the continent, asked the IMF board to ratify the governance commitment so that it can come into force in December this year.

The African Group’s statement read in part: “Last year, the Fund membership agreed to historic reforms that increased the representation of emerging market economies to better reflect their economic weight in the world, while the voice of some poorer countries was protected. These reforms, it is hoped, would contribute towards improving the legitimacy and credibility of the Fund and, therefore, allow it to play a greater role in promoting and sustaining global growth and economic stability.

“We, in this regard, invite all members to quickly consent to the respective quota share increases to enable the increased quotas to become effective by December 31, 2011. We welcome the agreement for the immediate start of the comprehensive review of the current quota formula and its completion by January 2013. The critical weaknesses in the quota formula were well acknowledged by all governors in their 2008 Reforms, and further observed during the 14th general review of quotas.

“In this regard, we welcome the Executive Board’s re-engagement on quota review discussions, and in particular the review of the quota formula.

“Accordingly, we encourage the board to persevere with this exercise in the course of the next two years in line with the agreed timeline for the 15th general review of quotas by January 2014, which we hope, will make a bold attempt to restore legitimacy of the Fund amongst all its members. In this respect, it is important that the quota formula review begins with a frank and thorough discussion and agreement on objectives and guiding principles for quota reform. Furthermore, a more systemic review of the goals that the quota formula should achieve and the variables that would best capture those goals is warranted. These goals must be based on two essential principles namely: Fair representation, and the mandate and role of the Fund.”

Nigeria’s Finance Minister continued: “We welcome the membership’s commitment to maintain the Executive Board size at 24 and an agreement on an all-elected board. To that end, we urge the membership to swiftly ratify the proposed amendment to the Articles of Agreement for all executive directors to be elected. The decision by the advanced European countries to reduce their combined board representation by two chairs in favour of a greater voice and representation of the emerging markets and developing countries is a commendable development. We urge all the membership to support an increase in the number of developing country executive directors to achieve the objective of improving the voice and representation of these countries.

“It is in this spirit that we continue to pursue a third chair for sub-Saharan Africa at the Fund.

Posted by admin on Sep 26 2011. Filed under Africa & World Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry