Strauss-Kahn said there were still “diverging views” but added: “I think an agreement will be found in the coming, say, weeks [or] maybe days.”
Emerging economies are demanding a greater share of votes and of directors’ seats on the IMF’s executive board.
These countries, backed by the US, want to see a transfer of power from Europe, which they say is over-represented. The US, which wants votes to be redistributed at the expense of small European nations, has blocked the biennial elections to the board that need to take place before 31 October.
Youssef Boutros-Ghali, chair of the International Monetary and Financial Committee, the IMF’s policymaking body, said there had been “significant progress”.
All the parties “are converging toward a package” that will “move the institution to a new plan, make it more adaptable and more able to deal with [multilateral] problems”.
The IMFC, which is made up of finance ministers, took the unusual step of stressing the “urgency” of resolving the issues and ordered Strauss-Kahn to report back on the progress on quota and governance reforms by the end of this month – the deadline for electing a new board.
As well as the board composition issue, it called for progress towards agreeing an open, transparent and merit-based process for selecting the head of the IMF.
Christine Lagarde, the French finance minister, said countries were “not far” from striking a deal and hoped to do so by the Seoul summit next month. She added: “We may deplore that we did not cover more ground than we actually did.” She said that Europe had “detailed” an offer “which consists in a two-year rotating seat” (a means of Europe sharing a board seat with an emerging economy).
If a deal is not struck by the 31 October deadline, there will be intense pressure to resolve it before the Seoul Summit of the G20 leaders, who called for IMF governance reform at their 2009 London Summit.
Yoon Jeung-hyun, the finance minister of South Korea that holds the G20 chair, told Emerging Markets that the change in the make-up of the IMF board needed to ensure that emerging economies’ representation is strengthened.
“The leaders are strongly committed to reaching an agreement and I expect concrete results at the Seoul summit in November,” he said. “As the chair of the G20, Korea will fulfill its role as a mediator to reach an agreement on IMF reform.
“The IMF quota and governance reform as a package should be pursued in accordance with the evolving economic weight of emerging and developing economies.”
Emerging Markets understands that the most powerful emerging nations are demanding that 5-6% more of the votes in the Fund are shifted away from advanced economies on top of previous agreed redistributions.
A 5% shift in votes agreed in 2008 still has not been approved by countries with a sufficient number of votes to ratify the deal. The IMFC urged members who had still not consented to the 2008 package to “do so promptly”.