China will become the third-largest member of the International Monetary Fund under a deal that will see Europe’s representation at the board trimmed by two seats.
>> In IMF Power Struggle, EU Agrees to Rotate 2 Board Seats
The agreement was sealed during a meeting among G-20 finance ministers and central bankers in Gyeongju, South Korea, according to IMF.
As reported by Devex, the United States had been pushing for European nations to give up some of their seats at the IMF executive board to make room for emerging nations such as China, India and Brazil. Last year, the G-20 agreed to shift at least 5 percent of IMF voting rights to these countries.
“I must pay tribute to the United States for having triggered the system and to the Europeans for having answered positively to this,” IMF Managing Director Dominique Strauss-Kahn said in a press conference following the meeting. “The Europeans committed themselves to reducing their presence on the board by two chairs, which is a huge effort, permitting two emerging countries to be new members of the board, which also increases the legitimacy of the institution.”
The accord also provides for a doubling of IMF quotas to USD340 billion. IMF staff pushed for such an action, arguing that this would put the fund in “a strong position to forestall or cope with potential crises in the coming years,” Reuters reports.
The U.S. will retain 17.67 percent share of IMF votes, while the so-called BRIC countries - Brazil, Russia, India and China - will enjoy a total of 14.18 percent, bringing the overall voting power of emerging markets to 42.29 percent.
According to Reuters, it will take a year to determine which European countries will have to yield their seats, but possible losers appear to be Belgium, Denmark, the Netherlands and Switzerland.
Another reform as part of the weekend deal: All directors will have to be elected by the full board, unlike before when the United States, Japan, Germany, France and Britain, being the five biggest members, could appoint their executive directors.