Lima, Peru: Emerging market economies sought a more calibrated approach to deal with the fallout of interest rates increases by the US Federal Reserve as well as interim reform measures at the International Monetary Fund (IMF) to reflect the growing importance of these economies.

In a meeting of finance ministers from G24 countries on 8 October, comprising emerging market economies including India, these countries expressed their disappointment at the lack of progress on IMF’s reform agenda announced in 2010, which focuses on quota and governance reforms.

India was represented by finance minister Arun Jaitley at the meetings that took place ahead of the plenary of the annual meeting of the IMF and World Bank scheduled on 9 October. They also sought higher voting rights in both the IMF and the World Bank to represent their current economic standing.

“This remains an impediment to IMF credibility, legitimacy, and effectiveness and has considerably delayed forward-looking commitments, namely, a new quota formula and the 15th General Review of Quotas," a press statement said.

The G24 countries also sought the initiation of the 15th General Review of Quotas, including a new quota formula, without any delays so as to meet the December 2015 deadline.

Given the stalemate, the countries are pushing for at least some interim measures.

“Implementing the 2010 reforms remains our key priority. Nevertheless, we believe that a decision to de-link quota reform from the Board reform amendment, which is the element of the 2010 reforms that requires ratification by the US Congress, would be the preferred option in the interim, as it increases IMF resources and also realigns quotas to reflect the increased economic weight of EMDCs (emerging markets and developing countries)," it said.

The interim ad hoc increases can, if properly designed, achieve meaningful progress towards the shifts in representation under the 2010 reforms, although it would increase IMF quota resources only marginally, they pointed out.

They also called for an effective and well-sequenced policy that is adequately communicated to guard against potential financial instability risks, including those coming from normalization of the US monetary policy.

Remya Nair is in Lima, Peru on the invitation of IMF as a part of its journalism fellowship programme.

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