IMF moves on voting reform, division lin

WASHINGTON - Agence France-Presse

A scene from the annual meeting of the International Monetary Fund and the World Bank in 2012. EPA photo

The International Monetary Fund has made important progress toward a new voting power structure for its members but remains divided over the formula, the IMF said on Jan. 31.

Under the terms of a quota and governance reform launched in 2010, the IMF executive board had until the end of January to review the quota formula that determines the voting power of its 188 members.

The formula is largely based on the size of a member’s economy as measured by gross domestic product, and its integration with the global economy.

The emerging-market and developing economies have demanded for year’s recognition of their increased importance in the global economy in the voting structure of the Washington-based institution.

Turkish Minister of Foreign Affairs Ali Babacan stated in December that IMF should increase Turkey’s quota shares, whereas the country raised to be 20th biggest partner of IMF from 42th.

After several meetings to review the formula, “important progress has been made in identifying key elements that could form the basis for a final agreement on a new quota formula,” the IMF board said in a statement.

GDP still most important determiner

A decision on a revised quota formula was postponed to January 2014 as part of a general review of quotas, with a view to building a consensus on a reform package that can garner the broadest possible support. According to the board report, there was agreement that GDP should remain the most important variable in determining a member’s voting power, and that its weight should be increased. The board also backed the role of openness as a determining factor, but there were divisions over how that is measured.

The big emerging-market countries have called for openness to be either dropped from the criteria or reduced in weight. To avoid overheating, some of these countries have curbed capital inflows or intervened in the currency markets, a negative under the current quota formula.

A senior IMF official, speaking on condition of anonymity, said there would be an updated database available in mid-year after the IMF receives statistics from its members. The new data will be updated through 2011.

“Then members will be able to see what differences will mean for them. It’s too early to finalize the formula,” the official said. “Deploring the meager result of two years of IMF debate over quota reform, Brazil’s representative to the IMF, Paulo Nogueira Batista reflects fundamentally the resistance to change on the part of overrepresented members, notably from Europe. The IMF is approaching what we could call a credibility cliff,” he said.