China gets bigger role within IMF
Source: Agencies |
October 24, 2010, Sunday
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Print Edition
Print Edition
FAST-GROWING emerging economies will get more say at the International Monetary Fund under a landmark agreement clinched yesterday that reflects a shift in global power from industrial countries.
Under the deal reached in Gyeongju, South Korea, more than 6 percent of voting shares at the fund will shift to dynamic developing countries such as China, which will become the third biggest member of the 187-strong Washington-based lender.
Europe will give up two of the eight or nine seats it controls at any given time on the IMF's Executive Board, which will continue to have 24 members, according to a statement issued after a meeting of finance ministers from the Group of 20 leading economies.
As part of a wide-ranging package, the G20 also agreed to double the IMF's quotas, which determine how much each country contributes to the IMF and how much it may borrow from it.
The quotas now total about US$340 billion. The IMF staff had argued for a doubling, saying it would put the fund "in a strong position to forestall or cope with potential crises in coming years."
The G20 said this makes the lender "more effective, credible and legitimate."
The governance reforms amount to an overhaul of the global economic order established when the fund was set up after World War II, prompting IMF Managing Director Dominique Strauss-Kahn to describe the agreement as historic.
"This makes for the biggest reform ever in the governance of the institution," he said.
The reduction in Europe's representation is less than the United States was seeking.
However, Washington, which has a 17.67 percent share of IMF quotas, will retain its veto on the fund's most important decisions. These will continue to require a super-majority vote of 85 percent, IMF officials said.
The G20 agreed a year ago to transfer at least 5 percent of voting rights to developing countries like India and Brazil. These nations did not have the clout within the fund to match their emergence as major engines of global growth.
"It was a long-expected reform that is really shifting the balance of power and making space for all economies, including emerging markets," said French Finance Minister Christine Lagarde.
China will leapfrog Germany, France and Britain in the fund's power rankings, with its quota share rising to 6.19 percent from 3.65 percent. India will be in 8th spot, Russia in 9th and Brazil in 10th, according to the Russian finance ministry.
Together, the four will have 14.18 percent of IMF quotas.
Emerging markets as a whole will have a 42.29 percent share, which the G20 said was likely to rise further following a comprehensive review of the quota formula due by January 2013.
"This does not complete the reform process," Russian Finance Minister Alexei Kudrin said. "The position of the emerging market countries is that this work should be continued."
Under the deal reached in Gyeongju, South Korea, more than 6 percent of voting shares at the fund will shift to dynamic developing countries such as China, which will become the third biggest member of the 187-strong Washington-based lender.
Europe will give up two of the eight or nine seats it controls at any given time on the IMF's Executive Board, which will continue to have 24 members, according to a statement issued after a meeting of finance ministers from the Group of 20 leading economies.
As part of a wide-ranging package, the G20 also agreed to double the IMF's quotas, which determine how much each country contributes to the IMF and how much it may borrow from it.
The quotas now total about US$340 billion. The IMF staff had argued for a doubling, saying it would put the fund "in a strong position to forestall or cope with potential crises in coming years."
The G20 said this makes the lender "more effective, credible and legitimate."
The governance reforms amount to an overhaul of the global economic order established when the fund was set up after World War II, prompting IMF Managing Director Dominique Strauss-Kahn to describe the agreement as historic.
"This makes for the biggest reform ever in the governance of the institution," he said.
The reduction in Europe's representation is less than the United States was seeking.
However, Washington, which has a 17.67 percent share of IMF quotas, will retain its veto on the fund's most important decisions. These will continue to require a super-majority vote of 85 percent, IMF officials said.
The G20 agreed a year ago to transfer at least 5 percent of voting rights to developing countries like India and Brazil. These nations did not have the clout within the fund to match their emergence as major engines of global growth.
"It was a long-expected reform that is really shifting the balance of power and making space for all economies, including emerging markets," said French Finance Minister Christine Lagarde.
China will leapfrog Germany, France and Britain in the fund's power rankings, with its quota share rising to 6.19 percent from 3.65 percent. India will be in 8th spot, Russia in 9th and Brazil in 10th, according to the Russian finance ministry.
Together, the four will have 14.18 percent of IMF quotas.
Emerging markets as a whole will have a 42.29 percent share, which the G20 said was likely to rise further following a comprehensive review of the quota formula due by January 2013.
"This does not complete the reform process," Russian Finance Minister Alexei Kudrin said. "The position of the emerging market countries is that this work should be continued."
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