The International Monetary Fund's executive board approved late on Friday measures that slightly boost the voting power of developing countries within the multilateral institution, officials said.
IMF managing director Dominique Strauss-Kahn told reporters at a briefing that the reform proposals - which still require approval by member states and the Fund's board of governors - form part of a wider overhaul of the IMF. "As such, it's not enough, but without this step it would have been totally impossible to move on rebuilding the legitimacy of a multilateral institution like the Fund," Strauss-Kahn said.
Developing nations have pushed for more say in how the IMF, created in the aftermath of World War II, is run. Its management is dominated by powerful industrial nations that also rank among its biggest financial supporters.
The newly approved proposals call for developed countries to give up a small fraction of their voting rights - equivalent to 1.6 percentage points - to the benefit of emerging and developing countries.
"It's a first step, others will follow," Strauss-Kahn said. Oxfam International, the humanitarian organisation, criticised the proposals as an inadequate response to long-sought appeals for reform. "At its heart, this reform is little better than the status quo for some countries, and a setback for the majority," said Elizabeth Stuart, a senior policy advisor for Oxfam International.
But the finance minister of South American powerhouse Brazil welcomed the move as a "victory for developing countries." "This was the first step, but not the last one," said Finance Minister Guido Mantega, noting that Brazil's voting rights in the IMF would increase by 20 percent.
Strauss-Kahn took office on November 1, after former managing director Paul Wolfowitz stepped down following a favouritism scandal, pledging to restore legitimacy and credibility to a heavily criticised institution losing relevance.
The Fund is tasked with maintaining international financial stability but its finances are strained as countries increasingly turn to other sources for loans. Under the plan Strauss-Kahn has overseen, developed countries would have 57.9 percent of IMF voting rights, compared with the current 59.5 percent, while emerging and developing countries would see their share rise to 42.1 percent, from 40.5 percent.
A rebalancing of voting rights at the six-decade-old institution was launched over two years ago. The reforms are expected to be ratified at the IMF annual meetings on April 12-13 in Washington. Officials pointed out, however, that the overhaul also has to be approved by member states. An initial reform was decided at the IMF annual meeting in September 2006, in Singapore.
An IMF Indian official, Adarsh Kishore, told AFP earlier Friday that the Fund's executive directors backed the reform measures by an "overwhelming majority" at a board meeting. "This is a step, though a small one, toward the long journey of governance and credibility reform in the IMF ... the ice has been broken and there is a forward movement," Kishore said.
An internal IMF document obtained by AFP showed that if the proposals are combined with what was negotiated at Singapore, the total amount of voting rights transferred to developing and emerging countries would amount to 2.7 percentage points.
IMF had economists devise a complex formula to arrive at the adjustment. Under the plan, a new quota formula is applied to each of the IMF's 185-member countries which reduces the domination of developed nations such as the United States and western European powers. "Clearly, this cannot be the end of the process for an institution desperately seeking credibility. Mr Strauss-Kahn should quickly put options on the table for a genuine reform," Oxfam's Stuart added.
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