WASHINGTON, Oct 12 (Reuters) - Emerging market countries on Saturday griped about the plodding progress in giving them more power at the International Monetary Fund.
The global lender, after its annual meetings this weekend, failed to meet a deadline originally self-imposed for 2012 to make historic changes meant to give emerging markets a greater say. The changes, a topic at each meeting since the deadline passed, would make China the third-largest member and cut Europe’s representation on the IMF’s board.
“Why does this problem remain with us in meeting after meeting?” India’s finance minister P. Chidambaram said in a statement. “Also, there is no clarity, even after the passage of a year, as to when this will be finally achieved.”
Brazil’s central bank governor Alexandre Tombini said the negotiations have entered a state of “complete paralysis.”
But European countries may be breathing a sigh of relief that a delay largely caused by the United States has taken them out of the spotlight for the moment, as they must give up further seats on the IMF’s 24-member board.
The delay on changes first agreed in 2010 also pushes off even more difficult decisions about how to reform the IMF, which was founded by the victors of World War Two, who still dominate the organization.
The 2010 reforms have been held up because the United States, the fund’s biggest and most powerful member, has not ratified them and prospects for action before year-end are slim due to gridlock in the U.S. Congress.
Under the 2010 agreements, European directors also agreed to give up two of their eight seats on the board, but have not fully decided which second seat to relinquish.
“U.S. Congress ratifying the last reform is the prerequisite for taking the next step,” Germany’s finance minister Wolfgang Schaeuble. “Then we Europeans will feel the heat a bit more because we have to provide our second seat.”
The next round of voting reforms may involve even more give and take, as IMF member countries wrangle over the specifics of an elaborate formula that determines the voting power of each country, how much it must contribute to the Fund and what it can borrow.
The formula takes into account the size of each economy, foreign exchange reserves and trade, and members are tussling over how much weight to give each measure.
The IMF said it planned to finalize a formula by January 2014, when it next reviews the voting shares of member countries. But many countries have not made formula debates a priority until the 2010 reforms are completed, meaning yet another deadline is likely to slip by.
The revision of the formula is intended to further reflect the rise of China, Brazil and other large emerging market economies, by giving greater weight to purchasing power GDP, which measures the buying power of an economy instead of just the dollar value.
European countries, for their part, have sought more emphasis on openness, the most hotly debated of all the measurements because it captures the vast trade flows between euro zone countries. Removing, or scaling back, the openness measure would sharply reduce Europe’s influence in the IMF.
“The main hurdles have been determined resistance to change on the part of overrepresented countries and somewhat flagging determination from IMF management to push the process forward,” Brazil’s Tombini said.
Africa is also demanding swift progress on the next round of reforms to the IMF’s 24-member board, asking for a third seat for sub-Saharan Africa, which currently only has two positions on the executive board representing 43 countries.
“The formula as presently applied has continued to generate an erosion of Africa’s quota at the IMF,” Pravin Gordhan, South Africa’s finance minister, said in a statement.
“Against this backdrop, we urge the IMF to address this representation deficiency with the urgency it deserves.”