IMF members likely to approve quota plan

  • Business
  • Sunday, 17 Sep 2006

SINGAPORE (AP): International Money Fund members appeared set to approve a reform proposal to raise quotas for China and three other countries, delegates said. 

But several major developing economies said they oppose the plan and warned its passage would undermine the IMF's legitimacy. 

The proposal to reform the IMF's power structure is a top objective of the institution's annual meeting, which runs through Wednesday. 

In a first step, it aims to boost the voting shares of China, South Korea, Mexico and Turkey to reflect their increased economic clout by increasing their quotas, or financial commitments, to the IMF. Later, the fund says it will rework the voting shares of all 184 member countries. 

The proposal needs to win 85 percent of IMF members' votes to pass. The vote deadline is Monday afternoon. 

"That number of votes has already been obtained,'' Argentine Economy Minister Felisa Miceli told reporters Saturday _ even though his country opposes the plan, saying it remains underrepresented. 

The weight of each country's vote is determined by its quota, or financial commitment, to the Washington-based IMF. The U.S. vote, for example, counts for about 17 percent of the total, Argentina has a 0.99 percent share of the vote, and tiny Swaziland in Africa has 0.03 percent of the vote. 

While virtually all members support changing the quota system, there are major differences on how it should be done. 

India wants the quota system to be overhauled in one step, not two. 

Brazilian Finance Minister Guido Mantega said although a large number of poorer nations are opposed to the two-stage plan, their total voting share has not reached the necessary 15 percent to kill the proposal. 

That reality, Mantega said, pointed to the flawed structure of the Washington-based financial institution, where decision making is dominated by a handful rich countries. 

"If this resolution is approved, the IMF will lose its legitimacy,'' Mantega said. 

The IMF, established in 1945, works to foster economic and financial stability, avert crises and can aid countries in trouble. At its founding, the fund was focused on the needs of the United States, Europe and Japan, but over time the importance of emerging economies has grown.  

The reform proposal is meant to redress these changes. 

But India, Brazil, Argentina and Egypt are skeptical that the IMF will get to the second stage of reforms, when all members' quotas will be recalculated. They are doubtful that wealthy member nations will give up their voting rights. 

"The picture that emerges at present points to a second stage that is by no means guaranteed to happen, or even if it happens, (it) may not advance the Fund's legitimacy,'' the four nations said in a statement. 

Still, other nations say the proposal at least represents progress. 

"It may not be very ideal, but it is something realistic,'' said Margarito Teves of the Philippines. 

Finance chiefs of the Group of Seven industrialized nations, who also met in Singapore Saturday, offered strong support for the proposal. 

"We have a united front behind the IMF reform,'' said Japanese Finance Minister Sadakazu Tanigaki. "It is likely that the resolution will be adopted.'' 

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Did you find this article insightful?


Across the site