How the IMF’s Managing Director is selected?

Recently, the IMF Executive Board has selected Christine Lagarde as its Managing Director; giving her a second term. The IMF had eleven Managing Directors in its nearly seventy-year history; all were from Europe. India has demanded that the next MD should be from Emerging Market Economies. Now it is interesting to see how the MD is selected or there is a possibility of an emerging market MD for IMF.

The MD is the chief of the Fund’s staff and as Chairman of the Executive Board. He shall conduct, under the direction of the Executive Board, the ordinary business of the Fund.

Role of Executive Board in the selection of the Managing Director

The IMF's 24-member Executive Board has the power to select the Managing Director as it is the top decision making body of the Fund.

The IMF has followed a merit based and open selection process in 2016 according to its website. An individual may be nominated for the position of Managing Director by a Fund Governor or an Executive Director during a nomination period.

Usually, the MD is selected on the basis of consensus. This has happened in all the previous occasions. But when more than one candidate emerges, there will be election. But when a competition emerges with a candidate from Emerging Market Economies, the weight based voting system will decide the MD.

Weighted voting system and the election of the MD

As per the IMF rules, if there is a competition, the candidate who gets majority of the votes at the Executive Board will be elected.

Under the IMF’s weighted voting system, the vote share of an Executive Member depends upon the vote share of the country (countries in the case of multicounty representation) he represents.

For India, the vote share is 2.66% and hence, when its representative in the Executive Board (Subir Gokarn) votes, 2.66% votes is cast. In this way, to be elected as the MD, a candidate should get the vote of the Executive Board members who cumulatively have more than 50% of votes in the IMF.

Remember, several Executive Board members have multi-country representation including India’s member- Subir Gokarn. This is because since there are 187 members in the IMF, some countries combine as a team to add vote strength so that they are represented by a member in the Executive Board.

Actually, if Subir Gokarn votes, the vote casted will be 3.08 (including the vote of India’s 2.66 plus the vote share of all countries who coordinately elected Mr Gokarn (Bangladesh, Bhutan and Sri Lanka besides India).

How selection is made if the number of candidates are more than three?

If the number of candidates exceeds three, the Executive Board will keep the names of these nominees in confidence until it prepares a shortlist of three candidates. This will be done by taking into account the candidate profile without geographical preferences.

The shortlisting process will be made through votes. Candidate who secure the most number of votes among Executive Board members, as per the Fund’s weighted voting system will be shortlisted.

Understanding between the US and European countries about the selection of the MD

So far, the US and West European countries have an understanding about the selection of the MD. As per this collusion, MD will be a European, a reciprocal measure by the US as it enjoys a veto power in the IMF. Advanced countries including the US and West European countries have nearly 47% of the votes in the IMF. Hence, it is easy for them to select an MD of their choice. Parting from tradition, India demanded an emerging market MD in the next turn. To select an EME candidate, India need the support of all countries including some from the developed bloc.

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