Members of the International Monetary Fund took steps toward significant reform of the organization at their annual meeting in Washington, D.C. from October 8 to 10, including a redistribution of IMF voting shares and the makeup of the IMF board.
The final IMF quota distribution is expected to be decided at the G20 Summit in Seoul in November.
Emerging countries including China expect to see their voting shares increase, while the European Union (EU) could lose seats on the IMF executive board.
Quota reform has long been a core goal of the IMF, which distributes voting shares in proportion to each member state's economic might and financial contribution to the organization. At present, the United States leads with a 16.74 percent share of voting rights, followed by Japan (6.12 percent), Germany (5.98 percent), France (4.94 percent), Britain (4.94 percent) and China (3.72 percent).
But the international economy has experienced great changes, with emerging economies and developing countries growing in strength. At the G20 Summit in Pittsburgh in the United States last September, leaders of the 20 countries agreed to shift at least 5 percent and 3 percent of voting shares in the IMF and the World Bank, respectively, to developing countries. Last April, the Development Committee, the decision-making institution of the IMF and World Bank, voted to shift 3.13 percentage points of voting rights from developed countries to developing countries. The move increased the aggregate voting rights of the latter to 49.19 percent.
Documents from the IMF indicate that IMF member countries are planning to discuss increasing voting rights in terms of important loans and international economic issues for emerging countries such as China, Brazil, Russia, India, the Republic of Korea and Turkey.
China's voting rights in the IMF could even be raised to 6 percent, lifting it to second or third place. "China's voting rights in the IMF should match its gross domestic product," said Sun Huayu, director of the China Center for International Monetary Research at the University of International Business and Economics.
"Since China is the world's second-largest economy after the United States, it is only reasonable for China to be in second place in voting shares," Sun was quoted as saying by Economic Information Daily. "The increase in voting shares will also increase China's international influence and its responsibility in supervising and managing international economic affairs."
However, while it is natural for countries to want to increase their voting shares, it is difficult to persuade other countries to reduce theirs, said Zhu Min, special adviser to the IMF and former Vice Governor of the People's Bank of China. "There are still some obstacles to shifting IMF quotas and voting rights," he said.
These obstacles stem from a power struggle between the United States and European countries. In August this year, the United States for the first time vetoed the 24-seat distribution mode of the IMF executive board, suggesting a cut to 20 seats, and asked European countries to surrender more IMF seats to emerging economies. That means the nine IMF seats currently occupied by European countries have to be reduced.
EU financial ministers approved a plan on October 1 for the EU to share two seats on the executive board with emerging economies. In exchange, they demanded that the United States give up its unilateral veto right for major board decisions. "If the U.S. had abandoned its veto right in the IMF, this plan could have been implemented smoothly," said Sun. "The U.S was the obstacle to materializing the quota target set in Pittsburgh last September."
Since its establishment in 1945, the IMF presidency has always belonged to Europe, while the president of the World Bank is by tradition an American. At least 85 percent of the 187 member countries must agree for the IMF to make a major decision. The United States, however, with a 16.74 percent share of voting rights, has veto power over any key decisions in the IMF. Unless the United States agrees to give up this right, the EU is unlikely to cut its seats on the executive board.
(Source: Economic Information Daily, Translated by LI YUZHU)