Enhancing Democratic Accountability

and Parliamentary Oversight of the

International Financial Institutions
James V. Riker, Ph.D.
New Rules for Global Finance Coalition
Washington, DC, USA

Presentation to the Policy Round Table on

“Financially Unaccountable International Financial Institutions,”
INFID, Jakarta, Indonesia, 13 June 2006

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 The IMF and World Bank:
What is there to smile about?
• “Singapore Prepares Four Million Smiles
Welcome for IMF,” The Strait Times, 12 June
2006, page 1.

Singapore’s Prime Minister Lee Hsien Loong

called on all four million citizens to greet
delegates of the upcoming IMF and World Bank
Annual Meeting in September 2006 “with four
million smiles” by submitting their photos at the
Four Million Smiles campaign web site at:
www.smilesS2006.com
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 The IMF and World Bank:
What is there to smile about?
Major Accountability Issues Remain:

• Presently, there is no democratically

accountable and open selection process for
the leadership of the World Bank or the IMF.
Should future leaders be chosen in a open
and transparent process based on merit
rather than on nationality?
• What progress has been made to increase
the “base votes” and voice of the least
developed countries in the IMF?
•Will European countries continue to hold 8
to 10 of the 24 IMF board chairs, or will new
democratic principles for representation
guide political formulas for reforming IMF
governance?

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 Overview
1. Setting the Context: The Fundamental Issue for
Developing Countries Is IFI Accountability –
This means going beyond financial accountability
to understand the democratic, ecological, political,
and social accountability of the international
financial institutions (IFIs) as well.
2. What Are the Possibilities for Enhancing the
Democratic Accountability of the IFIs?
• The International Parliamentary Petition (IPP)
initiative
• The Democratic Governance and Parliamentary
Oversight (DGPO) Project
3. A Shared Agenda for Advocacy focused on the
Singapore 2006 Annual Meetings and beyond. 4
 Setting the Context: The Need for Enhancing the
Democratic Accountability of the IFIs (1)
A growing consensus is emerging that the international
financial institutions (IFIs) face fundamental democratic
legitimacy crises due to the multi-dimensional issues of
accountability, transparency, representation, decision-
making, and effectiveness.

• The recent undemocratic leadership selection processes for the heads

of both the IMF and World Bank have put into question the democratic
legitimacy of these institutions (Kapur & Naim 2005).
• In terms of representation, the United Nations issued a report in early
2005 publicly criticizing the International Monetary Fund (IMF) and
World Bank for failing “to keep promises to increase the voice of
developing countries” in those institutions, issuing an appeal for
“fundamental reform” to address these governance issues.
• In the aftermath of the Asian and Argentine financial crises, civil society
organizations and parliaments in both the North and South have pressed
for more transparent and accountable processes and practices at the
IMF and the World Bank.
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 Setting the Context: The Need for Enhancing the
Democratic Accountability of the IFIs (2)
Over the past 60 years, the IMF and World Bank have exerted
increasing control over developing countries in their decision-
making about national economic policies and the terms of
international development finance.

• Shift in Decision-Making Away from Developing Countries: A key

democratic deficit has emerged where the locus of decision-making
over national economic policy has been transferred from national
representatives “into the hands of less representative international
bureaucrats” (Sikkink 2002: 310-311).

• Parliament Bypassed: A country’s Executive Director is often required

to report only to the Ministry of Finance, thus circumventing
democratic accountability to elected members of parliament.

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 Setting the Context: The Need for Enhancing the
Democratic Accountability of the IFIs (3)

• No Official Commitment to Parliamentary Processes: Despite the

IMF’s and World Bank’s professed adherence to the principles of
“good governance,” decision-making over key economic policy
choices and binding loan agreements is too often made without the
formal participation, review, public debate, or ratification of national
parliaments.

• “Local Ownership” Requires Parliamentary Engagement: If borrower

governments are expected to exhibit “local ownership” of these
policies and to embrace democratic processes in pursuit of their
national economic development, parliamentarians need to be fully
engaged in these processes, if they are to be viewed as legitimate,
especially in terms of exercising their voice in the review, consent or
dissent of the economic policy prescriptions and the binding loan
agreements of the IMF and World Bank.

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 What Are the Possibilities for Enhancing the
Democratic Accountability of the IFIs?

• First, there is a critical need to understand

the possibilities for systemic reforms and to
develop effective strategies for enhancing
the democratic accountability of the
international financial institutions.

• Second, a collaborative approach involving

civil society organizations, members of
parliament, and parliamentary networks, and
developing country governments is required
to hold the IFIs accountable.
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International Parliamentary Petition (IPP)
One positive step to address this situation is a petition initiative
to guarantee the right for effective parliamentary oversight of
national economic policy-making by borrower countries in their
relations with the international financial institutions.

• To date, the International Parliamentary Petition (IPP) has received

the support of over 1,400 members of parliament worldwide, over
400 members of whom are from the developing world and represent
over 50 countries. A group of parliamentarians formally presented
this petition to IMF and World Bank officials at the spring 2005
meetings.

• While the IPP initiative represents an important vehicle for facilitating

parliamentary attention on the IFIs, a longer-term multi-dimensional
strategy is needed to enhance the accountability, transparency,
representation and decision-making of these institutions, and to
coordinate efforts and support capacity-building for effective
parliamentary oversight of the international financial institutions at
the national, regional, and global levels.

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International Parliamentary Petition (IPP)
Proposes specific democratic reforms:

“that the democratically elected representatives

of recipient nations are the final arbiters of all
economic policies in their countries… [and] that
national parliaments in recipient nations have
the right and obligation to be fully involved in the
development and scrutiny of all measures
associated with BWI activities within their
borders, and hold the final power of ratification.”
Source: International Parliamentarians’ Petition for Democratic Oversight of
IMF and World Bank Policies, web site at: www.ipp-info.net.

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 Democratic Governance & Parliamentary
Oversight (DGPO) Project
Overall Project Research Agenda:

• What are the guiding principles for effective

democratic governance of the IFIs?
(i.e., standards for transparency, accountability
mechanisms, basis for representation, legitimate
decision-making processes).

• What role can civil society play in developing

and/or strengthening appropriate accountability
mechanisms at the national, regional, and global
levels for enhancing democratic governance and
parliamentary oversight of the IFIs?
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 ENHANCING DEMOCRATIC ACCOUNTABILITY &
PARLIAMENTARY OVERSIGHT OF THE IFIs
LEVEL OF ENHANCE ACCOUNTABILITY TARGETS OF
ACTION OF THE IFIs ADVOCACY
NATIONAL •Accountability
Strengthen Civil Society Capacity on IFI
Issues
•National Parliaments
(Brazil, Ghana, India)
•Provide Outreach to Parliament to Strengthen •Sub-national
Oversight of the IFIs Parliaments (India)
•Strengthen Government Position in its Relations
with the IFIs

REGIONAL •Strengthen Regional Civil Society Network on IFI •Asian Development

Accountability Issues Bank (ADB)
•Provide Outreach to Regional Parliamentary •Inter-American
Network Development Bank (IDB)
•Target Governments Advocacy toward Regional •Committee of
Development Banks Parliaments of the
Americas (COPA)

GLOBAL •Strengthen Global Civil Society Network on IFI •IMF

Accountability •World Bank
•Provide Outreach to Global Parliamentary •Parliamentary Network
Networks on the World Bank 12
•Target Governments Advocacy toward the IFIs (PNoWB)
The Role of Parliamentary Oversight
What oversight role should parliamentarians play in
ensuring effective democratic governance of the IFIs?

– The Basis for Representation: What role should members of

parliament play in enhancing the voice and vote of developing
countries in the governance of IFIs?
– Legitimate Decision-Making Processes: How should members
of parliament be engaged in the process for review and final
approval of IFI loans and projects, both those directly affecting
their respective countries and those that impinge on global
standards or public goods?
– Accountability Mechanisms: What forms of accountability are
appropriate for parliamentarians to hold Executive Directors
(EDs) for decisions taken at Board meetings?
– Standards for Transparency: How can parliamentarians and
the public acquire relevant information regarding Board
discussions and decisions?
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DGPO Project: Main Research Activities (1)
1. Case Studies of 3-4 Key Countries:
Each civil society country partner will share what they
have learned about what works, what does not, and
what is still needed to expand civil society collaboration
with national parliaments.

The initial civil society country partners include:

– Rede Brasil in Brazil;
– ISODEC in Ghana;
– Intercultural Resources in India; and
– INFID in Indonesia (pending approval).

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DGPO Project: Main Research Activities (1)
Country partners will explore:

• (a) How to expand and to enhance outreach to

their own national parliaments? (e.g., literacy
training and materials; budget monitoring); and
• (b) How to reinvigorate national civic processes
that enhance parliamentary oversight of the
IFIs? This means identifying a range of relevant
activities, such as strategic planning, capacity-
building, public education and training, outreach
to parliaments and other key actors (e.g., media,
political parties, trade unions, etc.).

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DGPO Project: Main Research Activities (2)

2. Conduct a Global Inventory of Relevant Initiatives:

Develop a broad catalogue of civil society initiatives to
hold the IFIs accountable and engage with their national
parliaments on a range of policy issues.
• The project will catalogue the civil society groups that
are engaged in some aspect of IFI democracy, including
developing a matrix of key governance objectives and
specific actions planned. This also means conducting
an inventory (i.e., both of initiatives and groups) of what
is currently happening to enhance parliamentary
oversight of the IFIs.

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 DGPO Project: Main Research Activities (3)

3. Develop a Data Base of Members of Parliament

and Groups of Parliamentarians: The project is
coordinating the development of a database and
forming a network of elected officials and groups of
parliamentarians interested in two levels of action:
• National: Increasing oversight and accountability
for IFI projects within their respective countries; &
• Global: Increasing oversight and accountability for
the actions and decisions of Executive Directors
(EDs) representing their countries.

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DGPO Project: Main Research Activities (4)
4. Design and Disseminate Educational and
Policy Tools to Elected Officials:
A range of materials (e.g., primer/handbook,
policy briefs, etc.) will be developed for members
of parliament (MPs) to:
• a) Enhance economic and political literacy of IFI
issues; and
• b) Share effective policy strategies, processes
and practices for enhancing the democratic
accountability of IFIs and their operations at the
national, regional, and global levels. 18
A Shared Agenda for Advocacy
1. Enact and implement legislation requiring
that the national parliaments of developing
countries are engaged in the formal
participation, review, public debate and
ratification process over the economic policy
prescriptions and loan agreements of the
international financial institutions (IFIs) and
regional development banks.
(i.e., International Parliamentary Petition)

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 A Shared Agenda for Advocacy
2. Enhance national parliamentarians’
oversight of the economic priorities,
policies and lending practices of the
international financial institutions (i.e.,
IMF, World Bank) and regional
development banks.
(e.g., Parliamentary Network on the World Bank –
PNoWB; Committee of Parliaments of the
Americas – COPA; Inter-American Federation of
Parliamentarians - FIPA)
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 A Shared Agenda for Advocacy
3. Reform the IFIs by making them more
accountable to broader publics.
Some strategies include:
• Opening these institutions to civil society
representatives and parliamentarians;
• Ensuring access to essential information;
• Fostering broader representation of developing
countries and non-state actors; and
• Altering the power distribution of these institutions
by strengthening the voting rights of developing
countries.
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