The US Senate on Friday ratified reforms to boost the representation of emerging economies at the International Monetary Fund as part of a budget bill that will clear the way for new industrial powerhouses like China and India to have more clout at the international lender.
A sprawling budget deal to keep the US government operating through next September contained a measure to put Brazil, China, India and Russia among the IMF's top 10 shareholders and give emerging markets more influence at the global lender. The legislation will now go to President Barack Obama.
Plans agreed in 2010 to give emerging markets more voting power and double the Fund's resources have been delayed by Congress. Under the new regime, China's vote at the IMF would increase to 6 percent from 3.8 percent. China's central bank welcomed the move in a statement on Saturday and said China would become the third-largest shareholder under the changes, from its previous sixth position.
"The 2010 reform plan will improve the representation and voice of emerging markets and developing countries in the IMF and is conducive to protecting the IMF's credibility, legitimacy and effectiveness," said the central bank. The reforms are the biggest change in the governance of the Fund since it was established after World War Two. "These reforms represent an important step but still only constitute a partial shift in making the IMF's governance structure fully representative of emerging markets' growing influence in the world economy," said Eswar Prasad, Professor of Trade Policy at Cornell University.
Under the reform, all 188 members' quotas will increase as the Fund's quota resources rise to about 477 billion special drawing rights, the IMF currency, ($659.67 billion) from about 238.5 billion, the Fund said in a statement. Under the new proposals, the IMF board will be entirely elected.