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G20 backs IMF quota review, changes to take time

October 16, 2005

By Chisa Fujioka

XIANGHE, China (Reuters) – Rich and emerging nations this
weekend agreed that the division of national influence over the
International Monetary Fund needed changing but they remained
deeply divided on how to do it.

Debate over national quotas, which determine IMF voting
rights, has been mounting, with fast-growing Asian nations
demanding more representation to reflect their rising economic
clout.

IMF chief Rodrigo Rato, attending a meeting of Group of 20
finance ministers and central bankers near Beijing, said
delegates had agreed to rebalance the quota system, now
weighted in favor of leading industrial powers.

“There is a general consensus that this is a very important
question of legitimacy of the institution and that there is a
need for it to be addressed in the near future,” he said on
Saturday.

“Some ministers have spoken of the next annual meetings in
Singapore (in September). I think that’s a good date,” he said.

Martin Redrado, Argentina’s central bank chief also
expected a plan next year, “giving to emerging economies, and
in particular countries like China, more representation in
terms of voting power and in terms of shares.”

Canada went so far as to say it would be willing to give up
some of its voting share for Asia.

“If the implication of what I say is that Western countries
as a whole would have to reduce their share of the pie, then
I’m sure that Canada would be willing to make its fair
contribution,” John McCallum, Canada’s minister of natural
resources and national revenue, said on the sidelines of the
G20 meeting.

But a senior Japanese finance ministry official said
countries were still at odds over the way in which
reallocations would be calculated. The IMF’s next quota review
is slated for January 2008.

Some European countries wanted the IMF to reconsider the
way in which quotas were calculated, he said. For example, some
argued that quotas should be based purely on the country’s
gross domestic product, rather than on a combination of
indicators such as trade volume and official reserves.

Others had argued that European countries could cope with
smaller shares, since much of their trade was conducted in the
euro, making them less vulnerable to currency shocks that may
call for financing from the Fund.

“It’s not going to be easy to reach a consensus, but that
does not mean we shouldn’t try,” the official said. “I think we
can arrive at a solution in a pragmatic way.”

In a sign that changes may take time, French Finance
Minister Thierry Breton told reporters that any reshuffling of
quotas that reduced European influence in the IMF would not be
acceptable.

Asian countries had distanced themselves from the Fund
since the Asian financial crises of the late 1990s, he said.

The question of reforming the fund needed to be addressed,
“but not to the detriment of Europe.”




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