The International Monetary Fund (IMF) on Friday cautiously backed plans to redistribute voting power among its 185 member countries, with some emerging and developing economies gaining more influence and others losing. ( Gulf )
The move would boost the voting shares of emerging economic powers China, India, Brazil, Mexico, South Korea. At the same time, it would reduce that of others like Russia, Egypt, Saudi Arabia, Venezuela, Argentina, Chile and South Africa.
The IMF board recommended the changes to its full membership for a final vote next month.
If approved, it will be one of the most comprehensive overhauls of the IMF's voting system in 60 years, aimed at recognising the rapid rise of economies such as China and India.
IMF Managing Director Dominique Strauss-Kahn said the agreement was a major step forward to rebalance the voting power from over-represented countries to under-represented ones, although he acknowledged it was not perfect.
"I'm not pretending that the reform is done and that now it is perfect and that representation of the different countries is exactly what we should expect. No," Strauss-Kahn told a news conference.
"The process goes in a good direction and it is an improvement in the legitimacy of the fund but it is not enough, absolutely not, but it is an improvement," he said, adding: "The only outcome of waiting more would probably have been that there won't be any reform at all."
Strauss-Kahn said the decision reflects members' commitment to improving the IMF's effectiveness, credibility and legitimacy.
"These were not easy advances. Difficult compromise was necessary by all fund members to reach this point," he said.
Strauss-Kahn said agreement was reached to revisit the issue every five years, which would periodically raise the voting shares of under-represented members according to a new voting formula approved on Friday.
Strauss-Kahn said all but five of the IMF's 24-member board members supported the changes. Egypt, Iran, Saudi Arabia, Russia and Argentina opposed the move, either by voting against it or abstaining.
He said if the reforms were adopted, it would "show that this institution is likely to find compromise. It shows that the institution is likely to evolve and adapt."
Brazil's finance minister Guido Mantega called the IMF decision "a victory for developing countries" and a victory for Strauss-Kahn.
Overall, the changes in voting shares amount to an aggregate shift of 5.4 percentage points to under-represented countries. Still, the actual shift from industrial countries to emerging ones was a small 2.7 percentage points.
Among industrial countries, the US' voting share dropped by 0.292 percentage points to 16.732; so did the shares of Germany, France, Britain, Italy and Canada. Japan was the only industrial country whose voting shares increased. The US, the IMF's largest and most influential shareholder, also holds a veto power, and has said it will forfeit its increase in voting power.
Spain, which was under-represented in IMF rankings, gained in both quotas and voting shares. Among Africa's largest economies, South Africa and Nigeria's quota and voting shares fell.
Strauss-Kahn said that while the changes did not immediately "change the face of the world," over time, countries' shares would adjust according to their economic performances. "While the proposal is not as ambitious as we would have liked, the US supports it as a step in the right direction," a US Treasury official said.
"We have our reservations but we consulted with a number of countries, particularly under-represented emerging markets, and, given their support, we decided that it was best for the institution to move forward at this time with this step," the official added.
Rather than extend the gruelling negotiations, most emerging economies said they decided to accept what they could get now and plan to keep pushing for more.
"We're not happy about the proposal because it falls short of what we had expected, hoped for and we had strived for," India's Executive Director to the IMF, Adarsh Kishore, said.