The BRIC countries (Brazil, Russia, India and China) are demanding greater decision making powers in the IMF’s New Arrangement to Borrow (NAB), in line with their proposed financial contributions.
Finance ministers from the BRICs, who met yesterday in Istanbul, agreed to make their joint $80 billion contribution to the NAB conditional on an increase in their votes and decision-making power.
Executive directors from the BRICs will step up pressure during technical meetings tomorrow on the eve of the Fund’s annual meeting, following gains in global governance achieved during the G20 meetings in Pittsburgh ten days ago.
“If the rules are not reviewed, we will stay out of this,” said Guido Mantega, Brazil’s finance minister. In practice, voting rights proportional to NAB contributions would give the BRICs 16% of the votes. That could give them a right of veto, according to the IMF governance rules.
The four BRICs ministers met with US Secretary Treasury Timothy Geithner, Mantega said. The US supported most BRICs claims at Pittsburgh and helped to overcome resistance from other countries, mainly from the European Union.
Mantega said: “We are together in this, the BRICs and the US, in order to build a new world economic order with greater representation for emerging countries.”
The Brazilian finance minister repeated that the BRICs would continue to push for an increase of 7% of votes at the IMF and an additional 6% at the World Bank, in line with the current minimum increase of 5% and 3% respectively, that was agreed in Pittsburgh.
“The US has demonstrated sympathy for reforms. ... The US is in favour of greater reforms. Europeans are those who are losing the most [with the proposed reforms], so there is naturally more resistance. No-one likes to lose influence”
The NAB offensive is part of a push from leading emerging market countries to increase their influence at the IMF, which needs to beef up its lending capacity to meet demand that has risen during the global crisis.
Mantega said: “The NAB would be a kind of new financial institution. It is going to have a volume of capital and a decision making process. This is why it is important. We put a condition to our participation: our $80 billion [contribution] should give us a corresponding weight within the NAB.
“Without such agreement, no decision can be taken,” he added, insisting on the need to raise the level of representation. He said discussions on this issue had started in Pittsburgh although they were not included in the final communique.
Mantega also said he was going to suggest that the G24, a group of developing countries which Brazil has assumed the rotating presidency, gains a seat at the G20. “This will strengthen the voice of emerging countries,” he said.
Brazil has been broadly supportive of the reforms carried out by IMF managing director Dominique Strauss-Kahn. Mantega said he was in favour of the idea of creating a lender of last resort and a kind of “global Central Bank that could act to correct global imbalances”.