IMF weighs landmark reforms

The Inter-national Monetary Fund on Friday weighed landmark reforms that will give China and other emerging-market economies a greater say in the financial institution. The important IMF executive board discussion comes ahead of next week's G20 summit in Seoul, expected to be heated amid currency and trade tensions largely centered on the United States and China.
Proposed by the Group of 20 advanced and emerging-market economies, the package of long-sought reforms aims to better reflect the growing importance of big emerging-market and developing economies in the global economy. The board was meeting Friday to discuss the measures, a spokeswoman told AFP. To describe the importance of this reform, IMF managing director Dominique Strauss-Kahn has not minced words.
"A historic decision which recreates the total legitimacy of the institution," he said last month after G20 finance chiefs forged the agreement at a meeting in South Korea. "There will be other reforms. But certainly today we put an end to a discussion which has been in the headlines for decades about the legitimacy of the institution," he said.
The IMF board's calendar casts the meeting under the title "IMF Quota and Governance Reform - Elements of an Agreement." Quotas are the contributions of the 187 member states to the fund's capital. The G20, which represents more than 90 percent of the global economy, has agreed they should be doubled, to about 750 billion dollars.
The "governance" reference addresses proposed changes in the balance of power on the 24-director executive board, whose members represent nations or groups of nations and run the day-to-day business of the IMF. Upon his arrival at the IMF in 2007, Strauss-Kahn made quota redistribution a top priority to resolve a long and bitter fight by emerging-market and developing countries to wrest greater power within the Washington-based institution.
Formed after World War II to remake the world financial system and prevent a return to the 1930s Depression, the IMF has long been dominated by Western powers. When a quota reform plan was officially adopted by member states in April 2008, Strauss-Kahn hailed it as "the beginning of the new legitimacy of the Fund."
But that quota reform has not been enacted due to the lack of a sufficient number of ratifications by member states. The G20 reform proposals are designed to close this chapter. One of the most notable aspects is that it will expand the "G5" on the board - Britain, France, Germany, Japan and the United States - to a "G10" that includes Brazil, China, India, Italy and Russia.
The remaining 177 countries will share 14 seats on the board. China will move up to the third-largest shareholder, from sixth place. Europeans have agreed to cede two of their nine seats. "A huge effort," Strauss-Kahn said. All members would be elected, instead of some of them being appointed.
Still, for the reforms to take effect, they will have to go through what could be a long process to obtain legislative ratifications, including in countries the most opposed to the European predominance. The G20 has committed "to work to complete by the annual meetings in 2012" the reforms, Strauss-Kahn said, referring to the IMF and World Bank meetings held in the autumn. The goal coincides with the scheduled end of Strauss-Kahn's five-year tenure at the IMF in October that year.