Last month, the International Monetary Fund’s (IMF) Board of Executive Directors issued a disappointing decision governing the institution’s policies on public access to information about its lending and other activities.

The board’s failure to include opening up to public scrutiny its own deliberations and decision-making on lending was by far the most disappointing aspect of it. This foot-dragging raises concerns that the institution is not preparing itself for inevitable changes looming on the horizon.

Chief among these changes is the very significant likelihood that the next managing director will be appointed based on merit, rather than named by European governments, as has been the custom. The term of the current managing director, Christine Lagarde, will end in 2016. The run up to her departure is likely to be characterised by a deafening din of calls for a merit-based replacement.

Academics, think tanks, trade unions and civil society organisations have pressed for years for the selection of both the head of the IMF and the World Bank to be based on who is best for the job rather than nationality.

Next time around the widespread perception that European governments have badly mishandled the eurocrisis will fuel these calls. The heavy presence of European governments on the IMF’s board, as well as their prerogative to appoint the Fund’s managing director (and consequently some of the key senior staff) contributes to the view that Europe’s heavy domination of the IMF has exacerbated mismanagement of the eurocrisis.

Disproportion influence

The Fund has long been criticised for its imbalanced governance arrangements, which dole out voting power according to size of one’s economy. This leaves the US with a share of votes large enough to block major board decisions. But what is also notable is the oversized voting shares of European countries, which are disproportionately large when compared to the size of their economies.

Unhappily, reform of these governance arrangements is moving at a glacial pace. The chief culprits for this are conservative members of the US legislature. They refuse to approve the modest changes agreed in 2010 to increase the voting shares of emerging countries and to reduce the number of European members on the Fund’s board. Of the 24 current board members, by conservative count, eight are European.

More transparency surrounding board decision-making was one of the key governance reforms that outside parties called for in 2010. But these reforms were not taken up.

Information produced by senior staff, such as that related to debt sustainability analysis and conditions in lending programs, remains secret before it is sent to the board.

And once the board receives technocrat recommendations, the public is not privy to exactly how each executive director representing a country, or block of countries, stands on those staff recommendations.

Neither the board’s detailed deliberations nor recorded votes when held are made public following its decisions (although board minutes are in fact kept, they are only made public after five years). This lack of transparency concerning what senior staff recommend as part of the IMF’s lending programs, and what the board decides, facilitates a lack of accountability. It means that senior IMF staff are not held to public account for their policy prescriptions and projections.

And neither are those government representatives on the board who have been approving the harsh lending programs with unworkable and unrealistic bailout conditions in European crisis countries for the past three years.

Lack of accountability

Several recent developments are illustrative of the problems with this lack of accountability.

In June, former IMF Chief Economist Simon Johnson issued a strong indictment of the Fund for failing to speak openly regarding Europe’s undercapitalised banks. “This is simply not something that German or French politicians wish for their electorates to understand,” he said.

Johnson noted that European government fears that these thinly capitalised banks would fail had led them to resist a much needed write-down of Greece’s unsustainable debt.

A prompt write-down of Greek debt would not have eliminated the pressure on the Greek government’s budget caused by excessive debt servicing.

But it would have eased it. Johnson lays the blame for the Fund’s unwillingness to speak candidly squarely on the heavy European over-representation at the institution. A more recent development involving Greece’s lending program concerns Paulo Nogueira Batista, the IMF Executive Director representing Brazil and 10 other Latin American countries.

Nogueira Batista in an extremely rare public statement for an executive director state at the end of July that he had abstained from voting to approve the most recent contribution to Greece’s bailout because IMF senior staff’s “over-optimistic” assumptions about economic growth and the sustainability of Greece’s debt.

Disappointingly, we generally do not know how members of the board vote.

This is because members of the board may tell us how they voted, but not how other members vote, according to Nogueira Batista.

The Fund’s code of conduct for members of the board has had the unfortunate effect of codifying the board’s lack of transparency by precluding its members from speaking about other member’s positions, and even details investigatory procedures for board members who “leak.”

As the Eurocrisis persists, there are important signs that the Fund should take heed of the increasing calls for board transparency.

At the end of July, two European Central Bank (ECB) members called for the ECB to issue minutes of its meetings, following the example of other central banks such as those in the US, UK and Japan.

“The minutes should include who voted for what and why,” Joerg Asmussen, an ECB member was quoted by Reuters as saying. This pressure for further transparency, and the accountability that would come with it, is on the heels of criticism of the ECB including by the IMF, for its lack of willingness to take measures to combat the crisis.

This includes such measures as further monetary easing through debt purchases and allowing inflation to rise above two per cent in Germany. Even financial market participants are now calling for further transparency.

Gabriel Sterne, a former IMF staffer turned investment banker, has called for a transparency revolution at the Fund (you can find his April recommendations, June and August). His recommendations relate both to transparency and accountability for senior staff analysis sent to the board, as well as for transparency and accountability of the board itself.

The governments on the Fund’s board should take these calls for further transparency surrounding its decision making seriously.

This will be essential for the board’s legitimacy, as well as to hold the next managing director – and his or her senior staff – to account.