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India leads campaign for revision of IMF reform plan

P.S. Suryanarayana

`The present reform plan may erode Fund's legitimacy'

SINGAPORE: India on Saturday joined forces with Argentina, Brazil and Egypt to lead a campaign against the latest IMF reform plan. Suggesting that it be "kept in abeyance," the four called for "a simple and transparent formula that is truly reflective of the economic standing of [all] countries."

The central theme of this political dissent is that the IMF's current initiative projects "a disturbing picture" that is "clearly unacceptable" to the bloc of developing countries as a whole. The finance ministers of the four countries described the plan, which was outlined by IMF Managing Director Rodrigo de Rato at a press conference here on Friday, as a "formula" that was both "opaque and flawed." It "may not advance the Fund's legitimacy."

The IMF's powers-that-be have already projected the present plan as a better deal for the "emerging economies" such as China and three others — Mexico, South Korea and Turkey. But these norms exclude India from the proposed first-stage process of allocating enhanced quotas for countries with "a weight in the global economy" but without a proper representation at the IMF Board.

India currently holds a seat at the IMF Board under the founding Bretton Woods formula. And Mr. de Rato hinted at the possibility of India being among those members whose quota-enhancements could be considered in a second-stage exercise.

The IMF's new plan, sent to its Board of Governors that would meet here on September 19 and 20, has been portrayed as a move to think out of the box and protect the cause of the low-income countries.

The finance ministers of India, Argentina, Brazil, and Egypt said "we and several other important emerging markets and developing countries, representing a substantial share of the global economy and population, are opposed to the Resolution sent by the Managing Director to the Governors on quotas and votes." Noting that the objective was to bring the IMF "more in line with the evolution of the global economy," the four ministers affirmed that, despite their protest, they "support the increase in quota for the four countries [China and others], who are the present beneficiaries of the [proposed] ad hoc quota increase."

Fundamental reforms of the IMF "are possible only if the contours of a final outcome are defined a priori followed by genuine consultations amongst nations as equal partners," the India-inclusive Group of Four said. "The picture that emerges at present points to a second stage that is by no means guaranteed to happen or, even if it happens, may not advance the Fund's legitimacy. In the event, the disturbing picture that emerges is that some developing countries will be given increases by reducing the shares of some other equally deserving developing countries. This position is clearly unacceptable."

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