A group of emerging market nations may finally be within sight of achieving a greater say in the way the IMF is run after being forced to wait for several years for the bigger place at the table which they were promised several years ago.
If a renewed push to get the US Congress to approve reforms to IMF quotas — countries’ voting rights — and to the structure of the Executive Board succeeds, China will move up to third place behind the US and Japan in the Fund, ahead of current number three — Germany.
The other members of the Bric grouping — India, Brazil and Russia — will also move up into the top 10 effective shareholders, thus giving them significantly larger collective influence within the IMF. Others such as Saudi Arabia will see their quota shares diminish.
“We have been talking with the US authorities and although they have been trying to push the resolution [permitting reforms] through Congress they have not been successful,” IMF deputy managing director Naoyuki Shinohara told Emerging Markets.
“We are looking forward to another opportunity after the mid-term elections in the United States.”
LAME DUCK OPPORTUNITY
What is known as a “lame duck” session of Congress will start after the November elections and there are hopes that this will provide an opportunity for slipping IMF reforms through the House of Representatives.
Passage of the enabling resolution by the US Congress — the only legislature not to have ratified reforms agreed to by IMF members in 2010 — would also allow a doubling of IMF quotas and the amount of financial resources countries put into the Fund to go into effect.
It would also allow negotiations to begin on a further quota reform, further expanding the influence of emerging economies within the Fund.
Sources within the IMF say that “considerable frustration” has built up among those members that achieved victory on paper in getting more say in the Fund, only to have it snatched away by Congressional intransigence.
Earlier this year, the IMF’s policy-making International Monetary and Finance Committee and the G20 group of emerging and advanced nations, called on the US to make every effort to get the reforms ratified.
“If nothing moves, the executive board will meet in early January to discuss alternative options,” Shinohara told Emerging Markets.
“We are discussing [this] but it will depend on how the US Congress responds and the prospects for passage of the resolution. There are lots of different ideas but at this moment there are no concrete options.”
The quota increase was approved by holders representing 70% of total holders in 2010 but a further resolution altering the composition of the board could not achieve necessary 85% approval without the co-operation of the US.