A small crowd looks at a one-man art demonstration at the indoor protest area within the venue of the International Monetary Fund-World Bank meetings in Singapore yesterday. - Reuters
SINGAPORE (AP):
The 184-nation International Monetary Fund (IMF) yesterday approved reforms to increase the voice of emerging economies China, South Korea, Turkey and Mexico to reflect their growing economic sway.
The move, which raises the voting share of those four nations, aims to boost the credibility of the IMF, which six decades after its founding is facing criticism for giving the United States and other Western powers too much influence.
The proposal won 90.6 per cent of the total vote, the IMF said in a release.
It needed 85 per cent to pass.
Voting shares affect member countries' say in the decisions of the Washington-based institution and how much they can borrow from it.
The IMF works to promote global economic stability and provide emergency loans to members in crisis - akin to a financial firefighter.
In a second step, the IMF will overhaul the voting structure of all member nations within two years to give developing nations a great voice.
"These governance reforms are tremendously important for the future of our institution. They will enhance our effectiveness and add legitimacy to all of the other reforms we are implementing," IMF Managing Director Rodrigo de Rato said in a statement prepared for delivery to delegates today.
Agenda item
The reform measure was the most important agenda item on IMF's annual meeting, held in Singapore along with its sister institution, the World Bank, which lends money to countries to fight poverty. The meetings wind up tomorrow.
When the IMF was founded in 1945, it focused on the needs of the United States, Europe and Japan. Over time, the importance of emerging economies has grown. The reforms seek to redress these changes.
"For institutions like the IMF to continue to be relevant they have to change with the economy," U.S. Treasury Secretary Henry Paulson said before the results were announced.
The IMF did not say which nations voted against the proposal, but German Finance Minister Peer Steinbrueck said Argentina, Brazil and some North African countries opposed it.
In days leading up to the vote, India, Brazil and Argentina had said the reforms should include all members and be implemented in one step. They also said they were doubtful that wealthy member nations are willing to see their voting shares reduced at a later stage.
African Concerned
Nigerian Finance Minister Nenadi Usman expressed concern that the second stage of reforms could cut African nations' shares.
"I believe it wouldn't be in anyone's interest to have Africa further impoverished, economically emasculated and completely silenced from the global stage," she said in a speech yesterday.
The weight of each nation's vote is tied to its quota, or financial commitment to the institution. Quotas are determined by the size of their economies and currency reserves as well as openness to trade and capital flows.
The U.S. vote, for example, is about 17 per cent of the total - an effective veto - and Japan has 6.1 per cent, while European nations together account for about a third. Argentina has a voting share of 0.99 per cent, while the Pacific island nation of Palau has 0.01 per cent.
The plan raises China's voting share to 3.65 per cent from 2.93, raising its rank from eighth to sixth.
South Korea's voting share rises to 1.33 per cent from 0.76, Mexico climbs to 1.431 per cent from 1.196 and Turkey goes to 0.548 from 0.453.
