IMF Reforms Current Affairs

Enter Your Email Address To Subscribe Current Affairs Daily Digest, Daily Quiz and other updates on Current Affairs:

IMF Reforms: India, China, Brazil, Russia get more voting rights

International Monetary Fund’s (IMF’s) long-pending 2010 Quota and Governance Reforms have finally become effective.

These proposed reforms are the biggest change in the governance of the IMF (lender of last resort) since it was established after World War II in 1945 after the Bretton Woods Conference.

Key facts

  • Gives boost the representation of emerging economies like India, China, Brazil, Russia and increases their power and greater say in IMF.
  • India’s voting rights increased by 0.3% from the current 2.3% to 2.6%. China’s voting rights increased by 2.2% from current 3.8% to 6 %.
  • These reforms shifted more than 6% of the quota shares to emerging and developing countries from the US and European countries. Russia and Brazil also have gained from the reforms.
  • The combined quotas or the capital resources of IMF also have doubled due to reforms to $659 billion from current $329 billion.
  • The doubling of quotas means that the shares (roles) of advanced European and Gulf countries have been reduced and that of emerging nations particularly China has been increased.
  • China will have the 3rd largest IMF quota and voting share after the US and Japan. While, India, Russia and Brazil will also be among the top 10 members of the IMF.
  • The voting power and quota shares of the IMF’s poorest member countries will be protected.
  • Under the reform, for the first time IMF’s Executive Board will consist entirely of elected Executive Directors and it ends the category of appointed Executive Directors.

Earlier Scenario: Currently, US, Japan, France, Germany, Italy, United Kingdom, Canada and Saudi Arabia are among the top ten members of the IMF. While, the member countries with the 5 largest quotas appoint an Executive Director.

Background

The reforms were agreed upon by the 188 members of the IMF in 2010 in the aftermath of the global financial meltdown. However, there implementations were delayed due to the time taken by the US Congress to approve the changes. But, were finally approved by the US Congress in December 2015.

Tags:

US Senate ratifies IMF reforms as part of a Budget Bill

The United States (US) Senate has ratified reforms in the International Monetary Fund (IMF) to boost the representation of emerging economies as part of a budget bill.

The reforms ratified in the legislation are in line with the proposed 2010 Quota Reforms and now it will go to President Barack Obama for assent.

These proposed reforms are the biggest change in the governance of the Fund since it was established after World War Two in 1945 after the Bretton Woods Conference.

Proposed reforms in the Bill

  • Put four emerging markets Brazil, China, India and Russia among the IMF’s top 10 shareholders and give emerging markets more influence at the global lender.
  • Gives emerging markets more voting power and double the Fund’s resources.
  • China’s vote at the IMF would increase to 6 per cent from 3.8 per cent. It would make it the third-largest shareholder from its previous sixth position.
  • The voting power and quota shares of the IMF’s poorest member countries will be protected.
  • IMF’s Board will entirely consist of elected Executive Directors. It will end the current category of appointment of Executive Directors by five largest quotas holders.
  • Quotas of all 188 members will increase as the Fund’s quota resources rise to about 477 billion special drawing rights (SDR) from 238.5 billion.
  • India’s voting rights will also rise to 2.6 per cent from the current 2.3 per cent. US’s quota share drop from 16.7 per cent to 16.5 per cent but it will retain its veto power.
  • The biggest losers in these proposed reforms are European economies which will see their voting rights diminished.

Tags:

Advertisement