Exodus at the IMF
1 May 2008
As the International Monetary Fund (IMF) continues to face escalating deficits and a crisis of credibility, almost a quarter of its 2,400 full-time staff in Washington, D.C. have voluntarily applied for resignations. At the same time, the Board of Governors of the IMF has approved the proposed quota and voice reforms with a 92% majority vote.
On Tuesday, April 29, the International Monetary Fund (IMF) announced that 591 “buyout requests” for resignation were received in response to the IMF's announcement at the end of 2007 that it would lay off 15% of its staff and implement other cost cutting measures. An IMF information notice reported that the actual number of buyout requests was as high as 620, far in excess of the institution’s goal of laying off 380 staff.
The IMF sought to trim the “top heavy” nature of the institution while also targeting the support staff. However, the surprise factor was that a significant number of mid-level economists also applied for the buyouts, and this has clearly surprised the IMF's management and leaders. The IMF thus plans to reserve the right to refuse the voluntary resignation requests from 100-125 of the mid-level professionals. IMF Managing Director, Dominique Strauss-Kahn rationalized the flood of voluntary resignations by publicly stating that the additional staff departures enable the IMF to hire “new skill,” such as financial market specialists, starting in September of this year.
Six department heads of the IMF will leave as part of this restructuring. They include: Mark Allen, director of the Policy Development and Review Department; Shailendra Anjaria, the IMF secretary; David Burton, director of the Asia and Pacific Department; Bert Keuppens, director of the Office of Internal Audit; Mohsin Khan, director of the Middle East and Central Asia Department; and Michael Kuhn, director of the Finance Department.
Domenico Lombardi, president of the Oxford Institute for Economic Policy and a former IMF board member, said in news reports that the buyouts “reflect low staff morale that has been going on for quite some time, and the perception in the eyes of many economists that the IMF has lost relevance among member countries.” Lombardi added that the weakening U.S. dollar reduces the competitiveness of IMF salaries in comparison to European salaries today.
While low institutional morale and the dwindling dollar certainly account for the key reasons behind the high level of voluntary resignation, the fact that the buyout amounts to about a year and a half of the staff person’s salary may also be factoring in to why so many of the staff are finding resignation particularly attractive.
The IMF faces annual loan deficits of $400 million by 2010. It is in the throes of a historic process of internal re-structuring, which entails staff lay-offs, administrative cost-cutting, as well as a fundamental re-think of its principle purpose, given that its lending portfolio has shrunk by almost 90% in the last ten years and that most middle-income countries no longer need to heed to its political policy advice. Many critics from both the right and the left have consistently pointed out that the loss of influence and credibility that the IMF is experiencing today is due to its own doing.
Earlier this week, the IMF also announced that its Board of Governors approved the IMF’s quota and vote reform measures by a majority of 92.93% (approval of the Resolution required 85% of the total voting power). The Board of Governors, composed of each member country’s finance minister and central bank governor, from 180 of the 185 member countries in the IMF cast their votes on April 28. Out of this, a whopping 175 members voted in favor of the governance reform proposed by the IMF. Academic and civil society critics argue that this measure does not shift a significant amount of voice and voting power to developing and low-income Executive Directors on the Board to affect meaningful governance reform (e.g. developed countries give up a mere 1.6% of their voting rights to emerging and developing countries).
While Strauss-Kahn claims that the vote symbolizes the “beginning of the new legitimacy of the IMF,” academic critics who wrote a letter to the IMF before the Spring Meetings in mid-April stated that the changes were not ambitious enough to restore the IMF’s position as a truly multilateral institution at a time when developed countries are positioned at the center of the ensuing financial turmoil and emerging economies form the key drivers of global growth. Their letter stated that the formula proposed by the IMF management “generates changes in shares that are widely accepted as moving away from rather than toward a closer alignment of voting structures with economic realities.”
Resources
IMF cost cuts spur almost 500 redundancies, by Krishna Guha and Chris Bryant, April 30, 2008. (Financial Times website)
IMF staff buyout draws more interest than expected, by Leslie Wroughton, April 29, 2008. (Reuters website)
IMF faces glut of staff seeking buyouts as reform advances, by Veronica Smith, April 29, 2008. (Uk.biz website)
Transcript of a Conference Call by a Senior IMF Official on IMF Restructuring, April 29, 2008. (IMF website)
IMF Executive Board Recommends Reforms to Overhaul Quota and Voice, IMF Press Release, March 28, 2008. (IMF website)
IMF Board of Governors Adopts Quota and Voice Reforms by Large Margin, IMF Press Release, April 29, 2008. (IMF website)
IMF approves changes to increase votes of developing countries, April 29, 2008. (Associated Press website)
Academics urge countries to reject IMF vote formula, by Lesley Wroughton, March 27, 2008. (Reuters website)