David Prosser: IMF reform must be high on the agenda

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Outlook No doubt George Osborne will be relieved to put the child benefit row behind him as he heads to this weekend's meeting of the International Monetary Fund. After the brickbats of angry parents, the bouquets of the IMF, which has lavished praise on his plans for austerity, are to be relished.

Still, will the Chancellor's gratitude for the IMF's support blind him to the troubling calls that must be made concerning its own problems? The IMF now has less than a month to agree reforms to its governance, or risk seeing its credibility begin to drain away.

Unless the fund can find a way through the conflicting interests of its members, the comfort it can offer the likes of Mr Osborne may in future be much more limited. Striking a bargain will be tough. In theory, all of the IMF's shareholders agree that developing economies need greater representation on the fund's board, to reflect their ever-increasing contribution to global growth. In practice, none of the IMF's existing dominant interests are prepared to cede any of their power.

Where does Mr Osborne stand, for example, on the recommendations made by an alliance including the Brookings Institution, Chatham House and Oxfam? They include the abolition of the automatic right of five countries – the UK, US, France, Germany and Japan – to a seat on the IMF board, in favour of elections for all 24 executive directorships. It's difficult to imagine him giving up such a privilege at his first IMF meeting as Chancellor.

Then there is the veto question. Germany is calling for a reduction in the majority required for important IMF decisions from 85 per cent to 75 per cent. The US, whose voting share is about 17 per cent, will block that – it will otherwise lose its own veto while an alliance of Europe's biggest countries and the Bric nations would both still retain such power.

The deadline for settling such arguments is 1 November, when the terms of office of the current IMF board directors come to an end. Until reforms are agreed, a new board cannot be selected. And if the existing board stays on with no mandate, the legitimacy of the fund will be undermined.