In the run-up to a G-20 summit in South Korea later this week, the International Monetary Fund’s executive board has approved governance reforms that overhaul representation of the fund’s board, increase voting power of emerging economies and double IMF quotas.
“Taken together, it’s a big shift in quotas and accordingly in voting power. It’s a very important increase in the voice and representation of the emerging market and developing countries … it is a historical reform of the IMF,” the Washington-based lender’s chief Dominique Strauss-Kahn said Friday (Nov. 5).
“It means we now have the top 10 shareholders that really represent the top 10 countries in the world, namely the United States, Japan, the four main European countries, and the four BRICs (Brazil, Russia, India, and China). The ranking of the countries is now really the ranking they have in the global economy,” he said.
The reforms allow for a shift of 6 percent of quota shares to the dynamic emerging market and developing countries.
“One-half of the shift comes from advanced economies, mostly European advanced economies, but the United States also played a part. One third comes from oil producers, countries like Saudi Arabia for instance. So altogether, 80 percent of the shift comes from advanced countries and oil producers,” Strauss-Kahn said. “Only 20 percent comes from other emerging countries.”
Advanced European nations will also have fewer seats at the fund’s board. IMF member nations’ quotas, the fund’s principal source of financial resources, will also be doubled to USD755.7 billion.
Quota increases and board reforms are expected to take effect in 2012.