Here’s a conundrum if you like riddles: how on earth is next summer’s Finance For Development summit in Addis Ababa supposed to take account of the vexed issue of reform of international financial institutions?
On one hand, the issue is almost impossible for the summit to ignore. IFI reform is a key ‘systemic issue’ in financing for development, and one that figures prominently in the Monterrey Consensus that emerged from the first FFD summit over a decade ago.
On the other hand, though, what exactly can governments say about the issue? An IMF reform package has already been agreed, after all – the problem is that it’s logjammed in the US Congress, and the results of the midterm elections have done nothing whatsoever to change that.
But what if, at Addis next July, European governments made a formal declaration that the next Managing Director of the IMF should be from a developing country – preferably, but not necessarily, matched by a declaration from the US that the next President of the World Bank should also be from the South? (Christine Lagarde’s five year term ends in July 2016; if Jim Kim also does a five year term, as Robert Zoellick did, then he would be due for replacement in July 2017.)
This declaration wouldn’t cost the EU (or US) any expenditure. It wouldn’t require approval by their legislatures. But it would send a real statement of seriousness about IFI reform by overturning the conventions of a European to run the Fund and an American to run the Bank.
Moreover, it would also be an outcome from the summit that would lead the front page of the Financial Times and Wall Street Journal the following day – something that wouldn’t happen if the key summit outcome is (say) better targeting of ODA, or a new investment facility of some sort.
The key likely objection to the idea is that it would be at odds with the idea of merit-based appointments. I take that objection seriously, and especially agree that it would be essential to avoid the posts of IMF MD and World Bank President becoming subject to regions ‘taking turns’, as they already do on the post of UN Secretary-General.
But on the other hand, the EU and US already had positions saying they supported merit-based appointments before the last appointments to these jobs, and then promptly put forward Lagarde and Jim Kim – which didn’t exactly make them look open to breaking with tradition.
The political bottom line here is that IFI reform is one of the few issues within the post-2015 ‘means of implementation’ agenda that the BRICs actually care about. And the BRICs are already showing their frustration at the glacial pace of change with the creation of their new BRICs Bank.
If governments have nothing to say on IFI reform at Addis, then there’s a real risk that it’ll look like they’re simply giving up on the reform agenda. But by sending a strong message about continued commitment to change in spite of the awkward squad on Capitol Hill, the EU and US could take a big step towards changing the difficult political mood on post-2015.