IMF his­toric Quota, Gov­er­nance Re­forms be­come ef­fec­tive

The Pak Banker - - COMPANIES/BOSS -

The con­di­tions for im­ple­ment­ing the In­ter­na­tional Mon­e­tary Fund's (IMF) 14th Gen­eral Quota Re­view, which de­liv­ers his­toric and far-reach­ing changes to the gov­er­nance and per­ma­nent cap­i­tal of the Fund, have now been sat­is­fied. The amend­ment to the IMF's Ar­ti­cles of Agree­ment cre­at­ing an all-elected IMF's Ex­ec­u­tive Board (Board Re­form Amend­ment) en­tered into force yes­ter­day. The Board Re­form Amend­ment was part of a broader pack­age of quota and gov­er­nance re­forms, which also in­cluded a dou­bling of IMF quo­tas un­der the 14th Gen­eral Re­view of Quo­tas and a ma­jor shift in quota shares to­ward dy­namic emerg­ing mar­ket and de­vel­op­ing coun­tries. The quota in­creases un­der the 14th Re­view, which were con­di­tional on the en­try into force of the Board Re­form Amend­ment, are ex­pected to come into ef­fect in the com­ing weeks.

The re­forms rep­re­sent a ma­jor step to­ward bet­ter re­flect­ing in the in­sti­tu­tion's gov­er­nance struc­ture the in­creas­ing role of dy­namic emerg­ing mar­ket and de­vel­op­ing coun­tries. The en­try into force of th­ese re­forms will re­in­force the cred­i­bil­ity, ef­fec­tive­ness, and le­git­i­macy of the IMF. For the first time four emerg­ing mar­ket coun­tries (Brazil, China, In­dia, and Rus­sia) will be among the 10 largest mem­bers of the IMF. The re­forms also in­crease the fi­nan­cial strength of the IMF, by dou­bling its per­ma­nent cap­i­tal re­sources to SDR 477 bil­lion (about US$659 bil­lion).

"I com­mend our mem­bers for rat­i­fy­ing th­ese truly his­toric re­forms," IMF Man­ag­ing Di­rec­tor Chris­tine La­garde said. "Th­ese re­forms will en­sure that the Fund is able to bet­ter meet and rep­re­sent the needs of its mem­bers in a rapidly chang­ing global en­vi­ron­ment. To­day marks a cru­cial step for­ward and it is not the end of change as our ef­forts to strengthen the IMF's gov­er­nance will con­tinue." The en­try into force of the Board Re­form Amend­ment ap­proved by the Board of Gov­er­nors in 2010 re­quired the ac­cep­tance by three fifths of the Fund's mem­bers rep­re­sent­ing 85 per­cent of the to­tal vot­ing power. The en­try into force was also a gen­eral ef­fec­tive­ness con­di­tion for the quota in­creases un­der the 14th Gen­eral Re­view of Quo­tas. With the en­try into force of the Board Re­form Amend­ment and all other gen­eral ef­fec­tive­ness con­di­tions met, mem­bers can now pay for their quota in­creases to make them ef­fec­tive. This process is ex­pected to be sub­stan­tially com­pleted within one month.

The 2010 Quota and Gov­er­nance re­forms were ap­proved by the IMF's Board of Gov­er­nors in De­cem­ber 2010 (see Press Re­lease No. 10/477) and built on an ear­lier set of re­forms that were ap­proved by the Gov­er­nors in April 2008.

Main Out­comes of the 2010 Quota Re­forms in­cludes the quo­tas of each of the IMF's 188 mem­bers will in­crease to a com­bined SDR 477 bil­lion (about US$659 bil­lion) from about SDR 238.5 bil­lion (about US$329 bil­lion). More than 6 per­cent of quota shares will shift to dy­namic emerg­ing mar­ket and de­vel­op­ing coun­tries and also from over-rep­re­sented to un­der-rep­re­sented IMF mem­bers. Four emerg­ing mar­ket coun­tries (Brazil, China, In­dia, and Rus­sia) will be among the 10 largest mem­bers of the IMF. Other top 10 mem­bers in­clude the United States, Ja­pan, and the four largest Euro­pean coun­tries (France, Ger­many, Italy, and the United King­dom). The quota shares and vot­ing power of the IMF's poor­est mem­ber coun­tries will be pro­tected. For the first time, the IMF's Board will con­sist en­tirely of elected Ex­ec­u­tive Di­rec­tors, end­ing the cat­e­gory of ap­pointed Ex­ec­u­tive Di­rec­tors (cur­rently the mem­bers with the five largest quo­tas ap­point an Ex­ec­u­tive Di­rec­tor).

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