Abstract:

The following article outlines reforms for the IMF so as to enhance financial crisis prevention and management through better surveillance and transparency. With the present quota regime, creditor countries command excessive voting power, resulting in skewed crisis analysis and resource distribution. Consequently, exploring the democratic deficit within the governance structure of the Fund reveals much needed changes in the quota regime and voting system of significant import. Expressly, the democratic deficit results from three factors, namely, (1) the decline of basic votes in the Fund's quota regime has reduced the voice of smaller countries in the governance of the Fund; (2) biases in the calculation of economic strength have caused the IMF to neglect the strength of emerging market economies; and (3) the needless complexity and opacity involved in the calculation of quotas. As the governance structure of the Fund is a product of the political and economic agreements embodied in the quota regime, addressing the quota bias, the variable measurement and specification problems will provide the route towards a Fund that is in tune with the growing contiguous democratic consensus. Quota adjustments alone prove insufficient towards this democratic end and therefore we will explore reassessing the Fund size, given the pressing need for a larger Fund as the present size is too small when compared to the global GDP; readjusting access to the resources of the Fund in accordance with the gross financing need of the concerned country; re-examining the voting system and the veto market; restructuring the Executive Board so that every member of the Board is an elected member and; the Fund as an Economic Security Council (ESC), promoting stability in the global economy.