Hopes raised for stalled IMF reform
"I don't think the US is going to drag its feet on this," the chairman of the IMF's governing board told Emerging Markets
Stalled talks on shifting IMF voting power to emerging economies are likely to culminate in a deal following US elections in November, the chairman of the IMFs governing board has said.
IMFC chairman Tharman Shanmugaratnam told Emerging Markets in an interview that although the lack of a US vote had meant a failure to deliver much anticipated governance reform in Tokyo this week as planned, he was hopeful that Washington would nevertheless deliver on commitments in the coming weeks.
I dont think the US is going to drag its feet on this. I have some trust in my American colleagues that they will want to do the responsible thing, Tharman, who is also Singapores finance minister, said. The US after all was one of the leading activists behind the reforms.
His comments came as IMF managing director Christine Lagarde reiterated the importance of ratifying the governance reforms agreed two years ago, in order to grant developing countries more seats on the managing board.
We are almost there almost because of the three thresholds we had to hit. We are short on one. We are working extremely hard on that third threshold. It is important that we actually deliver on that commitment that was made back in 2010, she said.
Tharman said that IMF governors were now moving towards the next phase of quota reforms which would be complete by early 2014.
This would include devising a new formula to determine voting shares. Any change that would give more weight to purchasing power GDP is likely to benefit large emerging economies, including China and Brazil.
The world economy continues to evolve and well see a non-trivial adjustment on quotas and voting power, even on existing formulas, Tharman said. We are reviewing the formula itself to see how it can be best fitted to the world were in and the world to come.
Weve got to have a quota formula that reflects the mandate and make-up of the Fund, not just geopolitics, he said.
Asked whether there was a willingness among European shareholders to fulfil their promise to cut their representation on the 24-member board a pledge Europe failed to keep in time for the IMFs Tokyo meeting Tharman said: There are enough reasonable players at the table. They know that the world economy is evolving and that the Funds governance has to reflect that.
But he added: We are still not in a situation I would describe as consensus.
Commenting on the pace of Fund reform, Oxfam policy expert Elizabeth Stuart said: IMF governance reforms are moving far too slowly. Emerging markets have stuck to their part of the bargain by giving the IMF the firepower it asked for, yet theyre still being denied their rightful place at the table. This reform is too little, and its late.
The US needs to ratify this agreement as quickly as possible. Further delay is unacceptable.
Tharman said the Fund must now work on a permanent increase in capital which comes with the quota review rather than focus on further ad hoc increases in bilateral contributions.
He denied that the IMF risked being held hostage to Europes crisis by virtue of its close involvement in attempting to resolve the single currency areas woes.
The IMF is very sharply aware of the need to preserve its objectivity. Its role in Europe is important and it has to do with providing surveillance and monitoring of programmes.