IMF vote reform bogged down by delays, deadlock
By Lesley Wroughton
TOKYO (Reuters) - The politics of mathematics has deadlocked IMF discussions on shifting voting power to emerging economies such as China, as European countries dig in their heels over changes to a little-known formula with big implications.
Governance reforms in the International Monetary Fund have been years in the making. A historic deal sealed in 2010 - and supposed to come into force this week in Tokyo where the IMF and World Bank are holding annual meetings - would make China the third-largest voting member and revamp the Fund's board to reduce Western Europe's dominance.
But that has been stalled by the U.S. presidential election. Washington has effective veto power over the 2010 package. Approving it would mean putting more money into the IMF, something the Obama administration is reluctant to do before the election.
The 2010 deal was part of a broader plan by the IMF to recognize within the organization the growing economic clout of emerging economies.
The next phase, which the IMF had hoped would be completed by January 2013, involves establishing a formula that would determine voting shares based on economic size, capital flows, foreign exchange reserves and other variables. Depending on the weighting, different countries benefit, which helps explain the wrangling over the math.
"The message being sent by the institution is that it is having enormous difficulty adapting its structure and functioning to the 21st Century," Paulo Nogueira Batista, the IMF executive director for Brazil and a constituency of other Latin American and Caribbean countries, told Reuters.
China, Brazil and other large emerging market economies have long contended that the IMF's current voting set-up unfairly benefits Europe and the United States, which dominated the IMF since its founding after World War Two.
They argue that if the IMF expects them to contribute more both to IMF resources and to the global economy, they deserve more power within the Fund. Continued...