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29 March 2024

G20 push for IMF voting power deal by November

G20 push for IMF voting power deal by November. (REUTERS)

Published
By Reuters

Group of 20 leaders have pledged to push for agreement on greater voting power for emerging economic powers in the International Monetary Fund by the next summit in South Korea in early November.

The leaders from major developed and developing nations reiterated their commitment to a shift in power to dynamic emerging economies of at least five per cent, agreed at a G20 leaders' meeting in Pittsburgh last year.

They called for an agreement by the next G20 summit on November 11-12. The agreement will have to be ratified by the IMF's 187 member countries by January 2011.

The shift will boost the say of countries such as China, India, Brazil and Russia in the IMF, which has long been dominated by the United States and European countries.

Emerging economies hold less than 45 per cent of voting shares in the IMF. They want an even bigger voting shift than five per cent to reflect their growing economic influence.

But the IMF negotiations pose political challenges because European countries must accept the biggest cuts in their votes in the IMF, an institution that influences global economic policies.

"We called for an acceleration of the substantial work still needed for the IMF to complete the quota reform by the Seoul Summit and in parallel deliver on other governance reforms, in line with commitments made in Pittsburgh," said the communiqué, published after the G20 meeting.

"Modernising the IMF's governance is a core element of our effort to improve the IMF's credibility, legitimacy, and effectiveness," it added.

The negotiations have taken a backseat to the fiscal crisis in Europe and concerns over the global recovery.

IMF chief Dominique Strauss-Kahn said IMF membership needed to decide on changes in the IMF voting power, but he expected the increase in China's voting power to be "rather big".

Chinese President Hu Jintao urged faster action to get the deal done. "We need to continue to push forward the reform of international financial institutions, move more quickly to adjust IMF quotas, allow more people from emerging markets and developing countries to take senior posts at international financial institutions and increase the representation and voice of developing countries," he said.

China scored in a recent shift in power in the IMF's sister organisation, the World Bank, overtaking Britain and France to rank third behind the United States and Japan in voting power.

South African Finance Minister Pravin Gordhan said the IMF needed a new formula to redistribute votes, and some countries' power will be diluted.

"The critical challenge will be how countries will have to give up something in order for others to get something," he said. "We'll now have to think about the sacrifices they will have to make in order get, if you like, the institutional rebalancing right in the IMF and indeed, the World Bank as well. We remain optimistic."

Some members believe that subscriptions that determine a members' voting power in the IMF need to be doubled to boost the Fund's resources, according to the communiqué.