IMF board to weigh controversial voting reform plan

IMF board to weigh controversial voting reform plan
By David Dieudonne AFP - Thursday, March 27 10:01 pm

WASHINGTON (AFP) - The International Monetary Fund's executive board on Friday will weigh a proposed voting rights reform, aimed at raising the developing world's voice but already criticized by experts as inadequate.

The reform package is the first major test of IMF managing director Dominique Strauss-Kahn, who took office in late September pledging to restore legitimacy to a heavily criticized institution that is losing relevance.

The proposals on the agenda of Friday's board meeting call for the developed countries to give up a fraction of their voting rights -- equivalent to 1.6 percentage point -- to the benefit of the emerging and developing countries, according to an internal document obtained by AFP.

Under the terms of the proposal, developed countries would have 57.9 percent of the voting rights, compared with the current 59.5 percent, while the emerging and developing countries would see their share rise to 42.1 percent, from 40.5 percent, the nearly 50-page document said.

A rebalancing of voting rights at the six-decade-old institution was launched more than two years ago and is expected to be completed at the IMF annual meetings on April 12-13 in Washington.

An initial reform was decided at the IMF annual meeting in September 2006, in Singapore.

The internal IMF document said that if the proposals are combined with what was negotiated at Singapore, the total amount of voting rights transferred to the developing and emerging countries would amount to 2.7 percentage points.

IMF economists devised a complex formula to arrive at the adjustment.

First the basic voting rights of each 185 member country are tripled, a move that particularly benefits the poor countries, mainly in Africa.

Then a new quota formula is applied to each country, which reduces the domination of the Group of Seven richest countries, especially the United States and Europe.

The package includes a series of "other elements" clearly aimed at securing the support of the most influential emerging countries, such as China, India and Brazil, in boosting the voting rights accrued under the new quota formula.

The reform measures, however, remain largely inadequate, experts said.

"The proposed reforms fall far short in addressing the challenges facing the IMF in its evolution toward a truly global institution with more balanced and inclusive representation and voting power," eight influential experts based in Washington said in a joint letter Wednesday to the IMF executive board.

They asked the board to reject the "inadequate" package at its meeting Friday.

If the board approves "the proposed inadequate package of reforms, we believe that supporters of a strong and viable IMF should recommend that their own and other member nations vote against that reform package when it comes to the Board of Governors later this year for formal adoption," the experts wrote.

The letter was signed by Colin Bradford, Ralph Bryant, Homi Kharas and Johannes Linn of The Brookings Institution; Edwin Truman and John Williamson of the Peterson Institute for International Economics; Nancy Birdsall of the Center for Global Development; and Jo Marie Griesgraber of the New Rules for Gobal Finance Coalition.

Oxfam International, the humanitarian organization, said on Thursday the proposed reforms represent "minimal" change for the organization's structure.

"After years of debate, a proposal that gives only a small increase in quota share for a handful of developing countries -- and none for the rest -- would be more than disappointing," said Oxfam International's Elizabeth Stuart.

"This proposal must be the beginning of a longer debate that will give poor countries a bigger say in the decision-making process," she said in a statement.

The proposal requires approval by a majority of the board members to become a resolution, which then would need support from 85 percent of the 185 member nations to be adopted.