The International Monetary Fund took on a bigger global role Sunday as its 186 member nations accepted the mantle of guiding a lasting economic recovery from the 20 largest economies.
The IMF’s steering committee endorsed the Group of 20 summit plan for sustainable growth after the worst economic crisis in decades, including an increase in voting rights of at least five percent for under-represented countries.
At their Pittsburgh summit a little more than a week ago, the G20 largest rich and emerging-market economies, asked the IMF to help them shape a robust global economy and reform the fragile financial system.
The International Monetary and Financial Committee (IMFC), representing all members, backed the plan at a meeting in Istanbul ahead of the annual meetings of the IMF and World Bank that open Tuesday.
The panel vowed to maintain stimulus support of growth “until a durable recovery is secured” and take further steps as needed “to revive credit, recover lost jobs, and reverse setbacks in poverty reduction.”
IMF chief Dominique Strauss-Kahn said that with the IMFC meeting, “we are off to the right start — building on the commitment to sustain cooperation and extending it to a far broader group of countries.”
He said the meetings offered “a unique opportunity to reshape the post-crisis world, to usher in a new era of collaborative global governance.”
Timothy Geithner, the US Treasury secretary, said the United States, effectively the only member with veto power in the Washington-based institution, is looking to the IMF “to play a key role in assisting the assessment of G20 economic and financial policies.”
Not all were satisfied with the IMF steering committee’s approval of the G20 request for a shift in the allocation of quotas, or voting power, to mainly developing countries.
“There will be no ‘new IMF’ without a more representative and democratic governance structure,” said Argentina’s finance minister, Amado Boudou.
“To achieve this goal, the voice and representation of developing countries, including the poorest, must be significantly increased,” said Boudou, who also represents Bolivia, Chile, Peru, Paraguay and Uruguay on the IMFC.
International aid agency Oxfam director Bernice Romero agreed, calling the quota shift “shameful,” and adding that “rich countries are still making decisions for the rest of the world.”
China’s deputy central bank governor, Yi Gang, said successful governance reforms, including a “significant” quota realignment, were key to “the capacity of the fund to deliver” by enhancing its legitimacy and effectiveness.
Strauss-Kahn called for a “substantial increase” in resources from members after the IMFC opened the door for action to reduce so-called global imbalances blamed for the current crisis.
The IMF managing director said the fund’s new Flexible Credit Line had provided important support to emerging-market economies amid the global economic crisis, with Mexico, Poland and Colombia signing up earlier this year.
But the credit line, offered at a fee for access to the fund’s reserves, is limited in scope and concerns only a certain category of countries, the former French Socialist finance minister said.
“Now we need to reflect and think about an extension of this idea of insurance” to fix the so-called global imbalances where some countries accumulate huge reserves and others build up huge deficits, he said.
“If you want to avoid countries, including China, to build such big reserves, contributing to global imbalances, we need to find another system,” he said.
An IMF pool of reserves that members could tap could serve as an international guarantee against financial shocks, he said.
“The communique opens the door for the IMF to think about it, and I think it’s very important for the post-crisis world because it’s one possible way to contribute to solving this global imbalances problem.”
In a speech Friday in Istanbul, Strauss-Kahn appealed for more resources so the fund could become a credible global lender of last resort, suggesting a trillion dollars or more may be needed.