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Power struggle tops economic concerns

An usher holds up a sign yesterday urging participants of the IMF and World Bank annual meetings in Singapore to keep silent during the speeches. Wealthy nations must make Africa their top poverty-fighting priority, World Bank President Paul Wolfowitz said yesterday, urging wealthy countries to follow through on promised aid. PHOTO: AP

IMF chief Rodrigo de Rato yesterday welcomed the passage of reforms giving a bigger voice to four emerging economies, but warned that the members face daunting challenges in keeping global growth on track.

"The global growth cycle may be turning," de Rato said, pointing to high oil prices, massive imbalances in trade and investment and the threat of renewed protectionism amid stalled world trade talks.

Meanwhile, World Bank President Paul Wolfowitz chided wealth countries to follow through on promised aid to Africa, the one region he said has been "conspicuously left behind."

"The international community is at risk of falling short on its commitments to increase aid to Africa," Wolfowitz told delegates attending the annual meeting of the World Bank, which lends money to help developing nations fight poverty, and its sister institution, the IMF.

"I remain convinced that Africa has to be our number one priority," he said, highlighting in particular the needs of countries that have recently emerged from crises, such as Sierra Leone, Liberia and the Democratic Republic of Congo.

De Rato and other finance leaders pressed for reviving the Doha Round of WTO talks that collapsed in July amid disagreements over how much to cut agricultural trade barriers.

"The stakes are too high to accept failure," de Rato said. "I call on the G7 countries and the major emerging market economies to intervene quickly to conserve the gains made in negotiations made so far, and to put the Doha Round back on track."

In the biggest news to come out of the annual meeting so far, the 184-nation IMF on Monday night approved reforms to increase the voting shares of China, South Korea, Turkey and Mexico.

As a second step of reform, the institution will overhaul the voting structure of all member nations.

The moves are meant to better reflect the growing economic influence of developing countries in the IMF, which was founded in 1945 to foster economic stability and provide emergency loans to members in financial crisis.

Voting shares affect member countries' say in the decisions of the Washington-based institution and how much they can borrow from it.

"These reforms are the first step in a process that will raise the level of representation of many emerging market countries," the IMF boss said. "They will enhance our effectiveness and add legitimacy to all the other reforms that we are implementing."

But Indian Finance Minister P. Chidambaram called the reform plan "hopelessly flawed." India and several other major developing economies like Argentina and Brazil wanted to see the voting shares of all members revised in one step.

The 23 countries that voted against the plan "lost the vote but have not lost the argument," Chidambaram said, adding "We hold the IMF to their promise."

The measure won 90.6 percent of the vote. It needed 85 percent to pass.

The weight of each nation's vote is tied to its quota, or financial commitments to the institution, which are determined by the sizes of their economies and currency reserves and openness to trade and capital flows.

The U.S. has a voting share of about 17 percent -- effective veto power -- while European nations together account for about a third of the total and Japan has 6.1 percent. Argentina has a voting share of 0.99 percent, while Palau has 0.01 percent.

Monday's decision raises China's voting share to 3.65 percent from 2.93, raising its rank from eighth to sixth. As a group, the four nations' voting share will grow to nearly 7 percent under the reforms from 5.3 percent.

De Rato warned about the growth of global imbalances and urged the US to act to curb its massive trade and fiscal deficits.

"The United States should take advantage of its good growth performance to make sustainable reductions in its structural fiscal deficit," he said.
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