IMF policymakers yesterday backed the most sweeping overhaul of the institution for six decades to give fast-growing China, South Korea, Mexico and Turkey more influence.
The plan to overhaul the 61-year-old IMF, whose balance of power still largely reflects the economic landscape at the end of World War II, was given the green light by the IMF's International Monetary and Financial Committee.
"We welcome today agreement to a comprehensive reform package for quotas which, if moved forward, we want to be completed no later than the 2008 annual meetings," British Chancellor of the Exchequer Gordon Brown said.
PHOTO: AFP
"These reforms we agreed should also enhance the participation and voice of low income countries in the International Monetary Fund," said Brown, chairman of the committee.
"This package when implemented will make significant progress in realigning quota shares with members' relative position in the world economy," said Brown, describing it as the biggest reform to the governance of the IMF for 60 years.
IMF Managing Director Rodrigo Rato, asked if China would be subject to greater pressure with an increase in its IMF voting rights, replied: "I don't think that the fact of having a larger role makes you subject to more pressure."
The plan now goes to the full 184-strong membership of the fund for final approval, with an announcement of the result of the vote expected by tomorrow.
During the 1990s the IMF was in the vanguard of efforts to resuscitate economies from Latin America to Asia, throwing out multibillion-dollar lifelines.
But recently it has had no major crisis to manage and with its lending on the decline the fund's own finances are running in the red.
Asian nations, backed by Japan, as well as developing countries have long been pushing for a greater say at the institution, which during its six-decade life so far has been dominated by the US, Europe and Japan.
The four countries to benefit from a boost in IMF voting stature are said by the fund to be the only members under-represented on all four of its criteria that determine a nation's voting rights.
Those criteria are the member's GDP, its openness to trade, the "variability" of its economy, in other words how volatile its growth is, and the amount of its reserves.
After the Singapore gathering, further discussions will seek agreement on a new formula to calculate the dollar quotas that each IMF member contributes to the fund and which determine its voting rights.
But within the membership there has been some disagreement on the reforms, with certain European and developing nations voicing dissatisfaction.
In addition four IMF members -- Argentina, Brazil, India and Egypt -- on Saturday expressed opposition to the overall reform drive and called for its suspension until "a simple and transparent formula" is worked out that is "truly reflective of the economic standing" of member countries.
Under the proposals here, China would see its share of total IMF voting rights raised to 3.65 percent from 2.94 percent now while South Korea's share would increase to 1.33 percent from 0.76.
Mexico would go to 1.43 percent from 1.20, with Turkey's participation climbing to 0.55 percent from 0.45.
The fund is also seeking to enhance its role in financial surveillance by shifting from a focus on individual countries to multilateral consultations, notably when the policies of one country "spill over" and affect the interests of others.
The proposal has been supported by the US, which would like to see more forceful IMF action on the Chinese exchange rate regime, which according to Washington gives Chinese goods an unfair advantage on export markets.
The committee in its statement "welcomed the multilateral consultation approach" and said progress toward drafting its "objectives, priorities and responsibilities" would be reviewed at a spring meeting in Washington.
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