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.