IMF: reform of the quota system became a reality

IMF: reform of the quota system became a reality

WASHINGTON, January 28. /Corr. Andrew Shitov/. Reform of national quotas and votes in the IMF has become a reality. As announced on Wednesday evening the press-service of the Fund, this “historic moment” for the leading international organization concerned with the maintenance of financial stability and helping countries in need.

Russia is in the top ten

According to a press release, on Tuesday entered into force the amendment to the Charter of the organization, according to which the IMF Board of Directors is fully elected.

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Explained that by the adoption of the amendment was tied to the doubling of the size of the quotas of member countries of the organization and “major redistribution” of these quotas in favor of “dynamically growing emerging market economies and developing countries”.

In practice, the quota increase must occur “in the coming weeks,” the authors of the document.

They explain that the current reforms represent “a major step towards better reflected in the governance structure of the organization” the current real balance of power in the world. “For the first time in four emerging economies – Brazil, China, India and Russia – will be included in the top ten of the largest members of the IMF, the document emphasizes. The reform also strengthened the financial power of the IMF, doubling its permanent capital resources… to about $659 billion”.

In the BRICS a practical veto

All four of the above member countries of the BRICS group, which, along with them also includes South Africa. As previously explained, the offset. specialists in the staff of the Foundation, henceforth this group will be almost guaranteed the right of veto when making important decisions in the IMF.

Formally until the desired threshold of the country group is a bit short, because a blocking stake to 15%. But in fact, according to one expert, “to fill a small deficit in the votes” of like-minded countries “is not too difficult”. “Almost the BRICS appears the veto”, – said the source.

Under the new rules, China’s national quota will reach 6.4%, Russia and India – 2,7%, Brazil’s to 2.3%, South Africa 0.6 per cent. This gives a total of 14.7%, but in solidarity with the group often vote with many other countries, such as Iran and Venezuela, even when the decision forced Washington and its Western allies.

The fight against privileges

However, the US and the EU still remain in IMF’s the actual masters of the situation. Do yourself a reformist plans were developed and approved in the Fund in 2008-2010, but to the most recently blocked by the U.S. Congress. Washington, as the largest shareholder of the organization, is it a blocking stake of votes. The EU countries taken together, this package even more.

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In the top ten of the leading members of BRICS countries join the USA, Japan, UK, Germany and France.

So far five countries with the largest quotas had the privilege to appoint their representatives to the Board of Directors of the IMF. Henceforth all members of the Council will have to officially pass the election procedure. The Europeans have agreed to cede to the Board of two chairs that are traditionally considered “their”. In thirteen directorates, representing a large group of countries (7 or more), the Directors will have additional substituents. The Council 24 members in 188 countries-members of the organization.

Not the last step

Generally, now the step is important, but certainly not the last. And the Fund’s management understands this. “I applaud our members that have ratified these historic reforms, – said the managing Director of the IMF, Christine Lagarde. They will give the Fund the ability to better meet and represent the needs of its members in the rapidly changing global situation. Today we have made a key step forward, and it’s not the end of changes, because our efforts to strengthen (system) governance of the IMF will be continued”.

In future plans, according to a press release, is to develop a new formula for calculating national quotas. In the General opinion of experts, the current formula gives some of the advantages of a relatively small and wealthy countries, including those EU members.

Money in advance

For approval new rules must have separate decision of the Board of Directors, which, as it turns out, was taken a week ago.

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After that, as explained experts, members of the organization must within 30 days pay to their new quotas. However, it is not about the actual transfer of funds, but only about reserving appropriate amounts by national Central banks.

Russia’s current quota is equal to about $8.2 billion Since the reforms imply a doubling of equity capital, this sum must also double. Actually it will rise even more, since the share of the Russian share in the IMF increased.

The most simple and efficient

After payment the country will be able to use a new package of votes in the Fund. In percentage terms it is slightly less than the monetary quota is due to the fact that a small proportion of voters are initially distributed equally among all member countries.

For example, Russia has a current quota of 2.5%, and the package votes – 2,39%. The U.S. quota – 17,68% and the package votes – 16,74%. In practice, this is of no importance.

Most decisions in the IMF, including the approval of programs of credit support to one or another country, shall be taken by simple majority of votes.

Qualified majority of 85% approved by the most important innovations affecting the interests of all members of the organization. Just because of this, the American legislators and had the opportunity a few years to slow down reform, the interests of the entire international community.