WASHINGTON Feb 24 International Monetary Fund
member countries are expected to take an important step in
giving emerging economic powers more say in the global
financial institution by approving a new voting formula in
April, IMF board officials say.
The proposed formula will be presented to the IMF board of
member countries before March 15, before a meeting of global
finance chiefs in Washington on April 12-13.
Approval of the formula, which calculates the voting power,
or so-called quotas, of each of the IMF's 185 member countries,
is a vital step toward changing the actual way in which voting
power will be divvied up in a process expected to be wrapped up
by the end of the year.
An overhaul of IMF voting power is critical to the
relevance of the IMF. But the issue has put countries at
political loggerheads because it threatens to erode the
dominance of the United States and Europe in the fund.
"There is great confidence that a deal on a new IMF formula
will be found at the next IMF Spring meeting," a European
official told Reuters.
"The IMF wants to present a proposal that would have the
support of most IMF shareholders and that could be close to the
final agreement," the official said.
Still, some emerging economies, such as Brazil, have
complained the formula does not adequately boost the voting
power of all emerging economies.
The change has been forced by the rapid rise of economic
powers in Asia and Latin America. It has become more pressing
now that China and India are the new global engines of economic
growth while the United States and Europe are slowing.
If the IMF is to expand its monitoring of the global
economy, emerging economies argue, the distribution of power in
the IMF needs to be more balanced.
On condition of anonymity, IMF officials told Reuters there
was increasing optimism that differences over power-sharing
within the global lender could be resolved by the April
meetings, now that a key block of countries had given ground.
Officials said a breakthrough in negotiations came when the
IMF's larger shareholders gave a cautious nod to including a
measure of purchasing power parity in the new formula, which
benefits rapidly growing emerging economies.
For more than a year, IMF member countries have negotiated
economic statistics to the most minute detail to formulate a
shift in voting power.
According to the proposed formula, seen by some directors,
quotas would be calculated according to a formula based on 50
percent of a country's gross domestic product, 30 percent on
the basis of its openness to trade, 15 percent of so-called
economic variability and 5 percent on the basis of its foreign
The formula would have the effect of boosting quotas for
developing countries because it would introduce a new
purchasing power parity measure of GDP, which tends to favor
developing countries. It would also take into consideration the
degree to which a country permitted market exchange rates to
The PPP component of GDP that will be used in the formula
will be from 40 percent to 50 percent, offering an advantage to
Industrial countries have long resisted the use of PPP data
partly because of the central role of market exchange rates in
the IMF's work.
The proposed formula also triples the so-called basic votes
of member countries, which are distributed equally to each
member. The move would ensure that the voting power of lesser
developed countries did not decline as more power shifted to
larger, emerging economies away from developed nations.
New IMF Managing Director Dominique Strauss-Kahn, a former
French economy minister, told board directors last week that an
agreement was necessary by the IMF meeting of finance chiefs.
"This addresses one of the most urgent priorities in the
governance of the IMF in terms of how members feel represented
within the institution," said Domenico Lombardi, president of
the Oxford Institute for Economic Policy and senior scholar at
Washington's Brookings Institution think-tank.
"Whether it will go through or not is the first serious
test for the managing director in terms of his ability to
generate consensus on a proposal that he will recommend the
board approves," he added. "So far he has kept a low profile."
(Additional reporting by Francesca Landini; Editing by Dan