Both organisations had to become more representative in their membership and leadership structures to better serve the new world economy, he told an annual gathering of the International Monetary Conference in Cape Town.

"The distribution of voting shares in the Fund and Bank need reform the better to reflect the more plural economic world we live in now ... as well as to prepare for the changes to come," he said.

"Gains to legitimacy will translate into gains in effectiveness -- we must have the courage to make them happen."

Enhanced legitimacy would come about through better representation and accountability, Mbeki said.

This would also involve reform of the procedures by which heads of the IMF and World Bank are chosen.

"The recent resignation of Paul Wolfowitz from his position as head of the World Bank has reopened the debate about that process," said Mbeki.

"Future appointments should be made using an open and transparent selection process with candidates not restricted by nationality."

Wolfowitz's departure over a scandal that centred around a generous pay and promotion package he arranged for his girlfriend Shaha Riza, a bank employee, renewed the debate over how the organisation's leader should be appointed.

According to an unwritten rule, the United States chooses the president of the World Bank.

European states however designate the head of the International Monetary Fund, the other institution born out of the 1944 Bretton Woods agreements.

A number of political leaders Chilean President Michelle Bachelet have criticised the practice.

Bachelet last week criticised the decision by US president George W. Bush to nominate former top diplomat and US trade chief Robert Zoellick to replace Wolfowitz as "grotesque".

Zoellick's appointment must now be confirmed by the World Bank's 24-member executive board.