Source:
IFIs Latin American Monitor
Wed Apr 30 2008
The poor have been given a little more say in the IMF. The rich countries have so far had 60.57 percent of voting rights in the IMF. The approved reform reduces that to 57.93 percent. For many developing countries and NGOs this is still not enough, but it is the biggest single change in voting rights in favour of developing countries in the IMF, which was set up in 1946.
Members of the International Monetary Fund (IMF) had time until April 28 to approve the proposal to give developing countries more power in the institution.
IPS was told that the proposal has been approved with 92.93 percent of the vote, comfortably more than the minimum of 85 percent needed for the new division of voting rights to enter into force.
Important IMF members like Russia and Saudi Arabia voted against the proposal, because it meant that their voting weight is reduced. But the opposition from them was not strong enough to keep the decision from being taken.
Developing countries have been complaining for many years that they do not have enough power within the IMF. Nor do many of them believe that the Fund is really for their good. For that reason, some developing countries have amassed enormous financial reserves to make sure that they will not need the IMF any more in case of a financial crisis.
IMF assistance to many developing countries in need in the past has been linked to lots of policy conditions. The most controversial of these were the Structural Adjustment Programmes that the IMF demanded in return for rescue loans.
These adjustment programmes meant in effect a lowering of import barriers and a move towards a supposedly free market economy that frequently harmed local industry and produce. Such reforms are usually referred to as the Washington Consensus – over which there is now little consensus.
The growing clout of the developing countries against such impositions, and the increasing strength of their economies, raised the pressure on the IMF to reform. In 2006, the voting rights of South Korea, Mexico, China and Turkey were increased. This week, a second important step was approved.
As a group, developing countries now see their share of voting rights grow from 31.7 percent to 34.49 percent. Most of the increase goes to the emerging economies, that now have 25.64 percent of the vote within IMF instead of the 23.88 percent earlier.
Countries like Brazil, China and India get more voting power, while Saudi Arabia and Russia have to make do with less. The share of the majority of low income countries has improved from 8.45 percent to 9.61 percent.
The transition countries, the former Soviet Union states, see their share drop slightly from 7.09 percent to 6.82 percent.
The most influential members of the IMF remain the U.S., Japan, Germany and a group headed by Belgium consisting of Turkey, Austria and several Central and Eastern European countries.
The IMF managing director has always been from a European country, by way of an agreement among the developed countries.
Source: IPS
Other voices on the IMF reform
* Ministers of the Group of 24 issued a communique during the Spring Meetings which called on developed countries to help developing countries cope with the spillover effects of the credit crisis. They also stressed that in the IMF reform process the shift in voting structure and in quota shares to developing countries was still insufficient. Also, major distortions in the measures of openness and variability that are to the detriment of most developing countries still have to be addressed. (See full comments by Martin Khor)
* Argentina voted against the proposed reform. This decision was far from predictable. Although in late 2007 it had shown its preference for the rejection, the Government changed in the direction of abstention during the first months of this year, as they got concessions in the reform of the Fund along with other countries. Among others, it obtained the commitment that the quota/votes calculation would be updated every five years.
Two weeks ago, the then minister Martin Lousteau had described the proposal as a "first step in the right direction" in his speech before the International Monetary and Financial Committee (IMF/WB Spring Meetings). Hours after he met with Strauss-Kahn, who confirmed his gesture via the Paris Club. But yesterday, however, in a decision taken at the government house, Argentina voted against it.
The Argentinian rejection did not go down well with the Fund, as La Nacion (the Argentinian daily) confirmed from reliable sources. Strauss-Kahn had worked hard to cultivate ties with Nestor and Cristina Kirchner, to the point of travelling to Buenos Aires when he was in line to succeed Rodrigo de Rato as well as for Cristina Kirchner's inauguration in December. To these trips was added only 15 days ago the wink he made to the Government for it to negotiate an agreement with the Paris Club without intervention of the IMF.
The key point is whether this decision will have any negative effects on Argentina. The role of the Fund in the Paris Club controversy is still uncertain. There is also the question of the guarantee that the World Bank and the IDB require from the IMF for the approval of certain loans.
Source: Clarín and La Nación
Related Information:
* IMF reform secures backing by wide margin, IMF Survey online
* Transcript of a conference vall by Senior IMF Officials on Board of Governors vote quota and voice
* News and reports on IMF/WB Spring Meetings 2008
* IMF/WB Annual Meeting - Singapore, 2006: IMF nod to China, Mexico, South Korea and Turkey
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