IMF to pave way for G-20 summit to prove success
With less than a week to go before the G-20 summit in Seoul, the IMF Board of Directors has approved the most radical ever decision to redistribute votes in favour of shaping markets and developing nations. The IMF Board has approved its plan for redistributing quotas and votes in the Fund, plan that was adopted during a recent meeting of the G-20 Finance Ministers in the Republic of Korea.
The first troika comprises the United States, Japan and China. China has moved to the third position from the sixth, falling only slightly short of Japan but outstripping Europe’s four leading nations, - Germany, the UK, France and Italy. The eighth, ninth and tenth are India, Russia and Brazil, - all three being China’s partners in the informal financial and economic club BRIC.
Notably, Brazil has (of all the BRIC members) seen its quota grow the most, specifically by a third, which made it possible for the Latin American giant to make it to the first 10 of the G-20 nations. Overall growth of the four BRIC countries has boosted their share of the world economy from 3.5% to 14.2%. So now the IMF recognizes the BRIC’s leading role in the global economy, says Moscow’s MGIMO University Professor Sergei Luzianin, and elaborates.
This is a breakthrough, says Sergei Luzianin, and the trend will keep gaining momentum. It is quite likely that in the next five years the developing nations, as well as other countries with a huge market potential will equalize their situation politically, economically, and in the framework of the IMF Board of Directors, and also in the framework of the just mentioned quotas.
In this sense the BRIC countries vote in concert, as if setting an example to follow by other major developing nations.
The national quota determines, among other things, a country’s clout during IMF voting and also its access to the Fund’s loans and other financial products.
Small wonder that demands for quota redistribution are invariably opposed by the US and the EU whose hefty quotas empower them to veto just about any motion made by anyone.
The IMF managing director Dominique Strauss-Kahn called the current redistribution of quotas the most fundamental change of the balance of forces since the IMF came about 65 years ago.
However, the “historic” redistribution results in part from a redistribution of quotas between the developing nations themselves.
For example, the quotas of Venezuela, Argentina, South Africa, Saudi Arabia and Ukraine are down while the IMF’s biggest shareholder, the US, has retained its veto power.
Taken together, the BRIC countries are now close to having a blocking stake though, but they still fall behind the cumulative package of votes enjoyed by the European Union.