Members of the International Monetary Fund have approved a proposal to reform the financial institution’s outdated voting system so as to better reflect the global economy.
In a bid to strengthen the institution’s legitimacy and credibility amid growing discontent that the countries most affected by the fund are those with least say, members of the IMF representing 90% of total voting power adopted a resolution, on 18 September 2006, containing plans for a two-step reform of the institution.
As a first step, the four most under-represented countries – China, South Korea, Turkey and Mexico – will see their quotas increased slightly. The second stage will require the 184 members to reach an agreement on a new formula for calculating voting quotas within the next two years (see EURACTIV 31 August 2006).
EU member states supported the two-step strategy, saying it was “important that the EU speaks with one voice” even though a new formula would lead to a loss in voting for some European countries, such as Belgium, the Netherlands and Luxemburg which, so far, all had larger quotas than China.
India led the opposition against the plan, disagreeing with the two-stage programme which it says perpetuates the rule of the US and Europe over the institution. Supported by 22 other developing countries, it argued that reforms must include an early and substantial increase – at least a tripling – in basic votes, which reflect the equality of states.
However, the 23 developing countries only accounted for 9.4% of the votes, despite including large countries such as India, Brazil, Argentina and Egypt.
Reaching agreement on the second phase of the reform agenda is far from guaranteed because it will require some heavily over-represented countries – mainly in Europe – to sacrifice some of their voting power.