The Group of 20 (G20) countries agreed in Pittsburgh yesterday to increase developing countries' voting power at the International Monetary Fund (IMF) by at least five percent, a major move to improve the international organization's legitimacy and effectiveness.
"We are committed to a shift in IMF quota share to dynamic emerging markets and developing countries of at least 5 percent from over-represented countries to under-represented countries using the current quota formula as the basis to work from," said a Leaders' Statement issued after a two-day summit meeting of the world's major economies in Pittsburgh, the US state of Pennsylvania.
"Today we have delivered on our promise to contribute over US$500 billion to a renewed and expanded IMF New Arrangements to Borrow (NAB)," the statement said.
The G20 also committed to protecting the voting share of the poorest in the IMF. On this basis and as part of the IMF's quota review, to be completed by January 2011, the G20 urged to accelerate the work "toward bringing the review to a successful conclusion."
Analysts believe this move will help improve the IMF's credibility, legitimacy and effectiveness as many developing countries have complained that they were underrepresented in the international organization.
The commitment by the G20 to a shift in IMF representation is "a groundbreaking step" to improve the IMF's legitimacy and effectiveness, said IMF Managing Director Dominique Strauss-Kahn.
"I am very encouraged by the outcome of the G20 summit, including the new role given to the IMF," he said, praising the reform as "a decisive move."
The reform was also hailed by many countries. He Yafei, China's vice foreign minister, said earlier yesterday that a shift in voting rights at the IMF was a key success of the Group of 20 summit.
"The most important thing is to send a message, that is to say the governance structure and decision-making procedures of the [international financial institution] should reflect the reality of the world economy today," He said.
"I don't think there's anybody who does not believe this is a necessary shift," said US Treasury Secretary Timothy Geithner, acknowledging that there have been differences with European countries on the shift at the IMF.
The loss in power would come from European nations, whose global economic clout has shrunk over the past two decades.
However, some analysts believe the reform failed to fully redress IMF imbalances as the poorest countries do not have enough voices, while some main emerging countries are still underrepresented in the organization.
"We welcome the G20's recognition that the IMF needs to change. Unfortunately, this updating of the IMF quota share is not real reform, it is tinkering at the edges," said Max Lawson, Oxfam senior policy adviser. "Without change to the IMF voting rules to give poor countries a real say, the IMF will remain the world's rich country club."
"The IMF must deliver on the promise of wider reform if it is to have a chance of being the 'legitimate and effective' institution the G20 envisages," he said.
The IMF will play a critical role in promoting global financial stability and rebalancing growth, said the statement released by the G20 leaders.
"The IMF should continue to strengthen its capacity to help its members cope with financial volatility, reducing the economic disruption from sudden swings in capital flows and the perceived need for excessive reserve accumulation," the statement said.
"As recovery takes hold, we will work together to strengthen the Fund's ability to provide even-handed, candid and independent surveillance of the risks facing the global economy and the international financial system," it added.
Moreover, the IMF will be given more power to monitor member countries' policy frameworks and their collective implications for financial stability and the level and pattern of global growth.
"This historic decision, and emergence of the G20 as a key forum for international economic cooperation, will lay the foundation for a deeper partnership in global economic policy between emerging and developing countries and the advanced economies," said Strauss-Kahn.
(Xinhua News Agency September 27, 2009)