Emerging nations impatient on stalled IMF reforms
TOKYO: Discontent simmered among fast-growing economies like China and Brazil which seek a bigger voice at the IMF as the last-resort lender wrapped up annual talks dominated by Europe’s debt crisis.
The talks had originally been expected to see the passage of key reforms that would give such nations a greater say at the International Monetary Fund, historically controlled by the US and Europe.
But final approval for the changes, which shuffle the Fund’s voting rights formula, is stalled in the US Congress with little movement expected before presidential elections next month.
Critics have warned that the changes are crucial to reflect the new face of a world economy dependent on emerging nations for growth, as some countries voiced growing impatience with the pace of change at the 188-member Fund.
Brazilian Finance Minister Guido Mantega charged that the reputation and relevance of the IMF — founded towards the end of World War II to help nations rebuild their shattered economies — was on the line.
“Resistance to reform undermines efforts to transform the IMF into a truly multilateral and representative organisation,” he said in Tokyo.
China, now the world’s second-largest economy and a potential key beneficiary of the reforms, issued its own diplomatic nudge to Washington.
“To safeguard the IMF’s legitimacy and effectiveness, we call on member countries to conclude the 2010 quota and governance reforms by completing the domestic approval process,” Yi Gang, deputy governor of China’s central bank, said in a statement.
The reforms, which must be approved by 113 countries that represent 85 per cent of IMF voting rights, cannot come into force without support from the US, which accounts for nearly 17 per cent of votes at the Fund.
The Group of 24 – including nations from South America, Africa and South Asia – said the shuffle would “better reflect the growing role of (emerging nations)…in the global economy, while enhancing the voice and representation of poor and small low-and middle-income countries”.
Meanwhile, the so-called BRICS nations – Brazil, Russia, India, China and South Africa – have been studying the feasibility of a new development bank for themselves and other developing nations.
The idea has been endorsed by the top economist at the World Bank – which also held its annual meeting in Tokyo this week – who said enormous growth in the world economy has left room for such an institution.
“The idea is not a bank for BRICS, but BRICS taking the initiative for a bank that is focused on emerging countries,” said Kaushik Basu, the World Bank’s chief economist.
“That was really something that complements the space of the World Bank and IMF… there is a scope for other clusters of banks which can do a lot of lending,” Basu added.
With Europe in crisis and the US charting an uncertain recovery, the IMF called on emerging nations to find their own ways to guard against shocks stemming from the fiscal and economic challenges in rich nations.
Brazil’s finance chief Mantega said the five-member BRICS club was pushing ahead with a move toward a self-managed reserve fund to “help forestall short-term liquidity pressures and provide mutual support”.
Such moves challenge the relevance of the IMF and underscore the need for quick change, critics said.
“The United States urgently needs to authorise IMF governance reform,” said Elizabeth Stuart, a spokeswoman for global aid agency Oxfam.
“This process has been dragging on far too long, and emerging economies need their rightful place at the table.”