Singapore’s prime minister has joined calls for the rapid further reform of the IMF’s quota system, and demanded that efforts to correct global imbalances should not be dictated by the G7 countries.
Speaking at the opening session of the World Bank/IMF annual meetings yesterday, Lee Hsien Loong identified mounting macroeconomic imbalances as a potential source of instability for the global economy.
“The longer corrective action is delayed, the bigger and more painful the inevitable adjustment will be.” In fixing the problem, he said, “dialogue must take place not just among G7 countries but also among the key players in Asia, Europe and oil-producing countries.”
The prime minister welcomed the first step of IMF reform but called for greater momentum.
“To play their roles more effectively and strengthen legitimacy and credibility, the Fund and Bank must have a more balanced representation,” he said.
“This will also better reflect current realities, where Asia has four of the 10 largest economies in the world, rather than the historical configuration of powers in the immediate post-war world.
“We must press forward with the second stage to revise the quota formula to increase the voice of countries whose stake in the global economy is not adequately recognised,” he said.
Mr Lee urged finance ministers to rejuvenate the Doha round of WTO talks, saying that the impasse in the round “carries a heavy cost and high risk. … the more we restructure trade and investment, the less prosperous and more insecure we will end up,” he said.
He argued that if developed countries turn to protectionism, “the emerging economies that have been exhorted to abide by multilteral principles will be very fast learners. A rising tide of protectionism will leave us all worse off. It has happened before. It can happen again.”