Washington: Members of the International Monetary Fund gave final approval by a wide margin to an overhaul that increases the votes of developing countries in the 185-nation organization, the IMF said Tuesday.
In a statement, the fund said the measures “will also enhance the voice and participation of low-income countries through a tripling of basic votes, the first such increase since the fund’s creation in 1944.”
The margin of approval by the fund’s governors was comfortable with 175 of the 180 countries that voted in favour of the measure, 93% of the membership. A senior IMF official told reporters in a conference call whose rules banned naming him that three countries voted against the reforms and two abstained, but he would not name them. Five countries did not vote.
“This vote shows the overwhelming level of support across the fund’s membership for these reforms, and I thank the members for this resounding endorsement,” said IMF managing director Dominique Strauss-Kahn in a statement. He said the vote marks “the beginning of the new legitimacy for the fund.”
Next review of quota and voting system in 2013
Strauss-Kahn, a former French finance minister who took over Nov. 1 pledging to restore the credibility and efficiency of the fund, said he expects “a continued shift over the next decade” toward giving more clout to developing countries. The next review of the quota and voting system comes in 2013.
The IMF and its sister institution, the World Bank, were founded at the end of World War II and have been dominated by U.S. the largest shareholder, and the major European Union countries. The IMF monitors global economy, provides economic advice to members and makes loans to countries trying to deal with financial crises.
Developing countries’ dependence on IMF for loans less
In recent years the fund has lost relevance, and its loan portfolio has declined. That is partly because some nations, particularly in Asia, that once needed to borrow from the fund have built up huge cash reserves so they would never have to ask the IMF for money again. Many developing countries also can borrow in international capital markets.
Top-tier developing countries,such as China, India and Brazil, will see their voting shares rise to 42.1% from 40.5% with a total gain of 2.7% if changes approved in 2006 are included. In addition, 54 countries will get an increase in quotas or shares while a tripling in basic votes overall will result in an increase in the voting power of 135 countries.
But the voting shares of China, India and Brazil do not approach the weight they carry in the global economy. According to the World Bank, China itself accounts for 9.7% of it.
The next step for the overhaul is approval by legislatures of most member countries, a process that is supposed to be completed by 31Oct but could be extended if necessary.
U.S has more than 15% shares, as does the European Union, taken together as a group. Since changing voting rights require 85% approval, both U.S. and the European Union have veto power.