Quota struggle over soul of Fund
GlobalMarkets, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Emerging Markets

Quota struggle over soul of Fund

Governors at odds on voting plan

A bitter struggle beckons over the way countries’ voting strength at the IMF is decided, after the governors approved a reform package.

The results of the vote had not been announced when Emerging Markets went to press, but officials said the proposals were adopted with a more than 90% majority, comfortably above the required 85%.

But developing nations warned that they will hold out for a complete overhaul of the voting system, reflecting the needs of their populations.


Nigerian President Olusegun Obasanjo weighed into the quota debate, arguing that every review so far had “further marginalised Africa’s interest”. In a speech read by Nigerian finance minister Ester Nenadi, Obasanjo said a new voting system was required “to ensure equity, fairness and a sense of belonging for all nations.”


Nenadi delivered Obasanjo’s speech after the president cut short his visit to Singapore early yesterday, following news of a Nigerian Air Force plane crash that officials said killed 12 of the 17 passengers, including senior army officers. Many delegations are unhappy about the IMF’s plan to reform quotas, but agreed to back the move’s tentative first phase – under which the votes of China, Turkey, Mexico and South Korea are increased – while holding fire for a fight over phase two.


Reservations harboured in Singapore were likely to break out into conflict by next year’s annual meetings in Washington, or the 2008 spring meetings at latest, Fund insiders said. Agreement on how to calculate quotas – the formulas that determine countries’ voting strengths in the Fund – may not be reached within the two-year deadline for launching the next reform proposal in 2008, officials fear.


Distinct camps are forming to fight for the IMF’s soul:Mercosur countries; Argentina, Brazil, Paraguay, Uruguay and Venezuela; coordinated their position before coming to Singapore; Sub-Saharan African governments are coalescing this week, with calls for the IMF to restore its “legitimacy”; and the G24 is arguing for a complete change in calculation to make purchasing power parity, not GDP, the key indicator. An IMF executive director said this would create a top five of the United States, China, Japan, India and Germany.


The phase one move – giving a bigger quota to four booming economies only – “is just a symbolic gesture, we’re looking on it as a pre-payment,” one ED commented. The IMF’s plan “is fundamentally flawed, but we agreed to go with it this time because the management felt goodwill was needed to have sufficient goodwill to go on to the difficult part”, phase two, he said.


According to senior Uruguayan official Fernando Lorenzo, phase two “is where the real wrangling over power-sharing will occur, and it will not be easy.” European economies had largely benefited from the “historic arrangements”, the ED argued. Coming months would see proponents of reform lobbying hard to turn those EU economies that might benefit from reform – such as Spain and ‘Celtic tiger’ Ireland – to change their minds.


Africa wants greater change still. Madagascar’s finance minister Benjamin Radavison yesterday said “right across the continent countries have been reforming with measures that were difficult for populations to take – the international community should recognise this, and implement its promises so Africa is no longer ignored.” It would take a radical change in the system to achieve this.


If the IMF doesn’t change its participation will be “sclerotic”, Brazil’s Finance Minister Guido Mantega said – and the same was true of the Inter-American Development Bank.

Gift this article