October 25, 2010
This story about IMF reform was published by EurActiv on 25th October 2010.
The G20 sealed an accord branded as “historic” on Saturday (24 October) to reform the International Monetary Fund, in a grand bargain that will see Europe give up two seats on the Fund’s Executive Board in return for greater responsibility from emerging economies on currency valuations.
At a meeting in Gyeongju, South Korea, G20 finance ministers recognised the quickening shift in economic power away from Western industrial nations by striking a surprise deal to give emerging nations a bigger voice in the International Monetary Fund.
Under the agreement, more than 6% of the IMF’s quotas – membership subscriptions that help determine voting power – will be shifted to emerging economies whose clout in the Fund has not kept pace with their economic ascent.
China will overtake traditional powerhouses Germany, France and Britain to become the third most powerful member of the IMF, up from sixth spot now.
India, Russia and Brazil will also wield more power in the fund, with greater voting powers as well as financial obligations and access to IMF funds.
Europe will give up two seats on the fund’s 24-strong Executive Board.
The United States had sought a greater reduction in Europe’s influence on the board, but agreed to the compromise in return for retaining its veto power over the Fund’s most important decisions.
IMF Managing Director Dominique Strauss-Kahn called the agreement historic. “This makes for the biggest reform ever in the governance of the institution,” he said.
“Our complaint was that the quota share should reflect ground reality and economic strengths currently,” Indian Finance Minister Pranab Mukherjee said. “Otherwise, it would have eroded the credibility of the institution. That has now been corrected.”
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