The IMF has not increased its main quota lending resources since 2010, a move that gave a bigger voice to fast growing emerging markets such as China and Brazil at the expense of wealthier European countries. — Reuters pic
WASHINGTON, Sept 29 — It is “vital” for International Monetary Fund shareholders to increase quota-based lending resources this year to deal with growing global economic shocks, IMF spokesperson Julie Kozack said on Thursday.
Member countries fund the IMF based on quotas, or shareholding, that correspond with voting power. The IMF has not increased its main quota lending resources since 2010, a move that gave a bigger voice to fast growing emerging markets such as China and Brazil at the expense of wealthier European countries.
Kozack told a regular press briefing that the Fund’s quota review, due for completion by December 15, will be a hot topic at the IMF-World Bank annual meetings next month in Marrakech, Morocco. This will include a US proposal for IMF member countries to contribute more quota funds in proportion to their current shareholdings, without altering the balance of voting power, she said.
“To make the global economy stronger and more resilient in the shock prone world that we are facing, it is vital to reach an agreement to increase the IMF quota resources before the end of the year,” Kozack said.
When former US President Donald Trump’s administration opposed a similar increase in 2019 to avoid a bigger voice for China, the IMF sidestepped the issue by renewing its crisis lending fund and delaying any changes to its shareholding structure until December 2023.
The US is the IMF’s largest shareholder with 16.5 per cent of its voting power, enough to veto major decisions. Japan is the second largest shareholder, with 6.14 per cent, followed by China at 6.08 per cent and Germany at 5.31 per cent.
With the Dec. 15 deadline fast approaching and countries still struggling with the aftermath of Covid-19, spillovers from Russia’s war in Ukraine and climate shocks, the negotiations have taken on more urgency.
Kozack said increasing quota-based resources would enable member countries to access larger, more “predictable” loans and reinforce the IMF’s role “at the center of the global financial safety net.”
Under the US plan, countries would add funds, but shareholding would not change, to be reviewed at a later date. But in lieu of more voting power, US Treasury Undersecretary Jay Shambaugh has proposed some alternatives to increasing the voice of emerging markets countries at the IMF.
These would include adding a third executive director on the IMF’s executive board to represent sub-Saharan Africa, and adding a fifth deputy managing director position to represent middle-income countries on the board.
The IMF currently has four deputy managing directors under IMF chief Kristalina Georgieva: a First Deputy position held by the United States, a deputy held by China, a deputy held by Japan and a fourth to represent all emerging markets and low income countries. A fifth position would give both emerging markets and low-income countries “a voice at the most senior level,” Shambaugh said.
Kozack said these proposals all would be discussed at the October 9 to 15 annual meetings in Marrakech. — Reuters
