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Will the G20 Keep Its Promises to Reform the International Financial Institutions?

Brittaney Warren and John Kirton, G20 Research Group
October 6, 2016

On October 7-9, 2016, the world's finance ministers, central bank governors and their officials are holding their annual meetings at the International Monetary Fund (IMF) and World Bank headquarters in Washington DC. They will discuss what the future of the global economy looks like, as well as aid effectiveness and poverty alleviation. The finance ministers and central bankers of the Group of 20 (G20), as well as the Group of Seven (G7), and possibly also the BRICS grouping of Brazil, Russia, India, China and South Africa, will likely take advantage of the occasion to hold meetings. These meetings will certainly discuss following upon commitments made by their leaders last month at the G20 Hangzhou Summit in China on September 4-5, at the BRICS meeting held just before the G20 summit in Hangzhou, and the G7 meeting held last May in Ise-Shima, Japan. They may also take the opportunity to make more commitments of their own.

Yet before the results of any of these meetings in Washington can be confidently judged, a key question must be addressed: are commitments on the shared subject of reforming the international financial institutions (IFIs), when made by leaders and member governments, actually kept?

One answer to this question can be found in the results of G20 members' compliance with the priority IFI commitments that their leaders have made since the start of G20 summitry in 2008.

On IFI reform, of the five commitments assessed for compliance from 2008 to 2015, G20 members' scored an average of 67%. This is a little lower than the G20's overall average of 71%, across 15 issues and 156 assessed commitments. It is, in fact, among the five lowest scoring issue areas, ahead of climate change, trade, corruption and international cooperation.

However, on related issues the G20 has scored higher. On financial regulation, where 17 commitments have been assessed, G20 members scored an average of 74%. On macroeconomics, with 22 assessed commitments, G20 members scored 81%. On development, which includes commitments on alleviating poverty and one on supporting the World Bank's Vulnerability Framework, the score was the same as the five assessed IFI commitments at 67%, with 42 commitments assessed. And on the 16 commitments assessed on climate change, including climate finance, G20 members scored 66%.

On IMF vote and voice reform specifically, compliance has been consistently declining, if still positive. In 2009 at Pittsburgh G20 leaders promised a "shift in [IMF] quota share to dynamic emerging markets and developing countries of at least 5% ." On this commitment, the G20's average was 53%. Interestingly, all members that fully or partially complied with this commitment were the biggest and wealthiest Group of Eight (G8) ones. Seven of the eight were members of the G8 (the eighth country was South Africa). This includes the United States, often criticized for holding a disproportionate amount of voting power at the IMF. The other G8 countries of Italy, the European Union and Russia, still a member of the G8 in 2009, all partially complied.

The IMF's biggest critics and beneficiaries of reform did not comply with the 2009 commitment: the emerging economies of Argentina, Brazil, China, India, Indonesia, Mexico and Turkey. These relatively less affluent G20 members may just have needed a bit more time to organize the resources needed to make progress, however. Indeed, compliance on the G20's 2010 Toronto commitment calling for an "acceleration of the substantial work still needed for the IMF to complete the quota reform " by the next summit, scheduled for less than five months later, skyrocketed to 95%. Here all countries fully complied except Argentina and Saudi Arabia, which partially complied. However, that jumpstart levelled off in 2011 with average compliance falling to 75%. It continued to fall to a low of 60% in 2013. Still, G20 members were much more receptive to IMF reform than to World Bank reform, complying with the one assessed commitment on the latter at a relatively low 48%.

How well G20 members performed on their IMF reform commitments in 2014 and 2015 has not yet been assessed by the G20 Research Group. Time will tell how much momentum will come from this year's summit in China (where the leaders made four commitments on IMF reform and one on World Bank reform). With China's renminbi now officially included as the fifth accepted currency in the IMF's basket of Special Drawing Rights, the world's rich and powerful are showing a greater acceptance of a more inclusive or multipolar world in which power is more evenly distributed. This advance, in addition to the generally positive compliance by G20 members on their IFI reform commitments in the past, suggests an increased push by G20 members at the IMF and World Bank meetings to ensure continued progress on the promises made, and thus to maintain institutional legitimacy. Maintaining this legitimacy will require support from developing and emerging countries, which are more than willing to band together to take their own path to ensure their national interests are met in today's changing world.

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Brittaney WarrenBrittaney Warren is a researcher with the G7 and G8 Research Group, the G20 Research Group and the BRICS Research Group, based at the Munk School of Global Affairs in Trinity College at the University of Toronto. She has worked in Spain and in Peru where she conducted field research on a sustainable development project with women living in extreme poverty. She has conducted research on the compliance of CARICOM members with their summit commitments on non-communicable diseases. Brittaney leads the social media strategy and marketing program for the G7 and G20 Research Groups' books and works on climate change, and was the lead researcher on an e-book project on "Delivering Sustainable Energy Access." Follow her at @brittaneywarren.

John KirtonJohn J. Kirton, is director of the G7 and G8 Research Group, and co-director of the G20 Research Group, the Global Health Diplomacy Program and the BRICS Research Group. He is also a Non-Resident Senior Fellow at the Chongyang Institute for Financial Studies at China's Renmin University. A professor of political science, he teaches global governance and international relations and Canadian foreign policy. He has advised the Canadian and Russian governments, the World Health Organization and the Pan American Health Organization on G7/8 and G20 participation and summitry, international trade and sustainable development, and has written widely on G7/8 and G20 summitry. Kirton is the author of many chapters and articles on the G7, G8 and G20. His most recent book is China's G20 Governance (Routledge, 2016). Other recent books include G20 Governance for a Globalized World (Ashgate, 2012) and (with Ella Kokotsis) The Global Governance of Climate Change: G7, G20 and UN Leadership (Ashgate, 2015), as well as The G8-G20 Relationship in Global Governance, co-edited with Marina Larionova (Ashgate, 2015). Kirton is also co-editor of several publications on the G7/8, the G20 and the BRICS published by Newsdesk Media, including G20 China: The Hangzhou Summit 2015 and G7 Japan: The Ise-Shima Summit 2016. Follow him at @jjkirton.

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