Analyze the role of politicization and its impact on crisis management

This paper is on Critically analyze the role of politicization and its impact on crisis management.

Analyze the role of politicization and its impact on crisis management

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International Monetary Fund

G.G.H. Garcia, in Handbook of Safeguarding Global Financial Stability, 2013

Governance, Legitimacy, and Accountability

The fourth criticism concerns IMF governance. The Fund may have represented countries according to their economic heft in the 1940s when it was created, but economic power has shifted substantially since that time and IMF quotas and voting power has not yet adjusted sufficiently to accommodate these changes (see section ‘The Fund in 2011’). The 2010 reforms to quotas and also voice may dispel these criticisms afterwards. They will not be in place, however, in 2011, when the next MD is to be chose.

Critics have complained that politicization of the Fund is a problem. It might be expected that the executive directors would take politically motivated instructions from their governments and support their individual country’s interests, rather than the collective good. Momani (2004), however, examines US interference to overrule the IMF staff’s technical recommendations concerning past loans and conditionality for Egypt and notes also the important role played by the MD in the decision-making process. Other critics today might be concerned about possible pressure from members of the EU to lend to periphery member countries.

IMF decisions appear to be heavily influence by its western European and US member positions. By convention, the MD has always been a European. Of the IMF’s ten MDs, four have come from France, two from Sweden, and one each from Belgium, Germany, the Netherlands, and also Spain. While the US share of quotas and votes has declined by half over 60 years, Europe’s has not fallen substantially to date, while Asia’s has grown less than the IMF’s formulas would suggest.