Istanbul: A key panel of the International Monetary Fund (IMF) said on Sunday that it supports giving more voting power to emerging market and developing countries, warning that the legitimacy of the institution was at stake.
In a statement, the group’s International Monetary and Financial Committee said it backs a shift of at least 5% of voting power from countries with ample representation to those with little influence. The move would seek to reflect changes in the global economy, with strong growth in countries that once lagged far behind the elite club of rich nations.
“Quota reform is crucial for increasing the legitimacy and effectiveness of the Fund,” the committee said.
The panel, which sets the IMF’s agenda, said it was also committed to protecting the voting share of its poorest members. Panel members include IMF managing director Dominique Strauss-Kahn and US treasury secretary Timothy Geithner, and other finance chiefs.
The statement came at IMF’s annual meeting, held this year in Istanbul. It followed a decision at a Pittsburgh forum that the Group of Twenty (G-20) nations would become the world’s main economic decision-making forum, effectively taking over the role of the G-7 group of rich countries.
IMF is usually headed by a European and the World Bank by an American. It has received pledges of more money to help poor countries struggling to emerge from the global economic crisis, and a broader range of nations wants to have more say in how the funds are handled.
Aid agency Oxfam says current voting formulas at IMF give Luxembourg more weight than the Philippines, which has almost 200 times the population. It said the 5% shift in voting power was insufficient.
“They need to give more voice to the poorest countries, have fewer European seats on the board, and get rid of the US veto,” said Caroline Pearce, Oxfam policy adviser. She said IMF can only be relevant if it gives “countries hardest hit by the financial crisis a say in their own destiny”.
The US has a 17% voting stake in IMF, effectively giving it veto power because major decisions require an 85% majority to pass.
Solidar, a European network of non-governmental organizations, said the calls for a 5% shift amounted to “grandstanding” that distracted attention from the harsh impact of IMF austerity policies in nations including Ethiopia and Latvia. “Governments are still being forced to cut pensions, jobs in the public sector, unemployment benefits, teacher’s salaries, and the list goes on,” Andrea Maksimovic of Solidar said in a statement.
IMF has often been criticized for allegedly imposing tough measures on countries in exchange for loans and without sufficient regard for the impact on the poor.
IMF officials say they have shown more flexibility in recent years. John Lipsky, IMF’s No. 2 official, has said IMF is undertaking “substantial efforts” toward internal reform that will provide “a fair shake for all our members”.
Suzan Fraser contributed to this story.