IMF pledges to complete quota revisions by January

The International Monetary Fund’s (IMF) policy steering committee has urged Fund members to complete a plan that seeks to give developing economies a bigger voice in the multilateral agency’s decision-making process. The International Monetary and Financial Committee (IMFC) also agreed to continue carrying out financial sector reforms to ensure that needed changes are implemented to prevent a repeat of the financial crisis that engulfed the world in the past two years, as well as monitor the level of sovereign debt amid signs of economic recovery. In a communiqué posted on the IMF Website last Saturday, the steering committee listed these three among the initiatives the multilateral lender should pursue up to its next meeting in October. The committee advises and reports to the IMF’s Board of Governors, the Fund’s highest decision-making body. The board is composed of representatives from each of the IMF’s 186-member countries. The IMFC communiqués guide the IMF’s work in between its meetings, which are held in April and October. The spring meetings, which are how the April meetings are called, closed on Sunday. "We commit to accelerate our work to improve the Fund’s legitimacy, credibility and effectiveness through quota and governance reforms and modernizing its surveillance and financing mandates," the IMFC said. It urged IMF members to consent to quota and voice reforms proposed in 2008, which seek to increase the representation of fast-growing economies and give low-income countries more say in the IMF’s decision-making. The plan involves a new quota formula and a review of quota and voting shares every five years. Quota refers to the amount a country must contribute to the IMF; a higher quota means higher voting power. The Intergovernmental Group of 24 on International Monetary Affairs and Development (G24), which the Philippines is a member of, is pushing a 7-percent shift of voting rights to emerging economies from "overrepresented" developed markets, particularly the US. A minimum of 112 countries, representing 85 percent of the IMF’s total voting power, must accept the proposed reforms for these to take effect. The IMF said as of March 10, 65 countries had accepted. "We pledge to complete the quota review before January 2011 in line with the parameters agreed in Istanbul and in parallel deliver on other governance reforms," the IMFC said. Youssef Boutros-Ghali, Egypt’s Finance minister and IFMC chairman, noted during a press conference called after the communiqué was issued that while emerging economies were strongly pushing for a bigger voice at the IMF, this could not be done easily. "There is a very strong push by emerging market economies that they be recognized in the financial institutions... The obstacle is getting everybody to agree. There are 185, 186 countries. Some will have to give up some of their quota," he said. John Lipsky, IMF managing director, said at the same press conference that the quota review could be undertaken only after 2008 gross domestic product data are compiled. "We need to have complete data. It will be 2008 data, which is not yet ready. It will be next month." On Friday, the G24 reiterated its call for the IMF to shift more voting power to them from advanced economies. The IMFC said efforts to better regulate the financial sector were incomplete and that it would increase efforts to form consensus on how to move this forward. "Problems in the financial sector were at the heart of the recent crisis. Strengthening financial regulation, supervision and resilience remains a critical but as yet incomplete task. We agree to redouble efforts to forge a collaborative and consistent approach for a stable global financial system that can support the economic recovery," it said. "We look forward to discussing the work by the Fund on a range of options on how the financial sector can make a fair and substantial contribution to cover the burden of extraordinary government support, while reducing excessive risk-taking, helping to promote a level playing field and respecting country circumstances," it added. It also said that while there are signs of economic recovery, challenges remain. "We will continue to work to phase in country-specific exits from stimulus, recognizing the diverse pace of recovery and potential spillovers across countries and regions... We are strongly committed to ensuring sustainable public finances and addressing sovereign debt risks." The IMFC also urged a debate on how to further improve the Fund’s performance of its duties, particularly surveillance, crisis prevention and options to improve the global safety net. "We call on the Fund to study the policy options to promote long-term stability and the proper functioning of the international monetary system. In the meantime, we call on the Fund to strengthen surveillance further, including sharpening its focus on macro-financial issues, capital flows and systemic risks and spillovers," the committee said.