The head of the International Monetary Fund has backed reforms that would give Beijing more voting rights within the fund, warning that the fund faces “disaster” if it still does not have enough financial resources to aid struggling countries.
In an interview with the Financial Times, Kristalina Georgieva called on the International Monetary Fund to better reflect changes in the global economy over the past decade, including the rise of China.
“Continuous changes are needed to reflect changes in the world economy,” she said, alluding to the gap between China’s 6 percent voting power in the International Monetary Fund and its influence in the world economy. About three times as much.
Georgieva talks about changes to voting rights “I’m optimistic that we will achieve this goal,” Shi said.
Traditionally, each IMF member country has a so-called quota based on its position in the world economy, which determines its contribution to the fund as well as voting rights within the institution and access to emergency financing.
Currently, although China accounts for a larger share of global gross domestic product, its quota is still smaller than Japan’s. As the IMF’s largest shareholder, the United States holds about 17% of the shares, giving it veto power over quota decisions, which require 85% support.
The last agreed-upon quota change was in 2010, when China’s economy was growing significantly. These changes take effect in 2016.
Georgieva has called for a reconsideration of the IMF’s representativeness, as the United States works to shore up the Washington-based multilateral institution to increase Western influence over emerging and developing countries.
At the same time, she also seeks to increase the agency’s resources to address global economic issues.
“We are at the center of the global financial safety net,” she said. “If the fund fails to step up and provide confidence to others, the damage will be profound from an economic and social perspective as well as from a security perspective.”
Ahead of an International Monetary Fund and World Bank meeting in Marrakech this month, Georgieva acknowledged that changes in voting weights were not on the agenda for the quota review, which is currently scheduled to end in December.
As part of a push for more resources, the United States wants to increase quotas for member states without immediately redistributing voting rights, along with governance reforms to give greater weight to developing countries.
Georgieva said such changes were supported by an “overwhelming majority” of the fund’s membership and would keep it “strong into the future.”
But she noted that the issue of adjusting representation had come up in discussions among member states.
U.S. officials have left the door open to backing a share redistribution at a later stage but have said they would veto for now any decision by Beijing to expand voting rights.
Jay Shenbo, the U.S. Treasury undersecretary for international affairs, said the move would require “all countries – especially those with increased quotas” to respect “the role and norms of the International Monetary Fund.”
China is now the world’s largest bilateral lender and has been criticized by Western creditors for blocking debt relief deals for troubled countries.
Georgieva said it was “not easy at all” to cooperate with Beijing on such issues. But she added that China had been in “steady engagement” with the IMF on restructuring issues and had generally been “quite constructive”.
She emphasized that the fund is calling on shareholders to provide more resources at a time when the global economy may be hampered by sluggish growth.
“We’re simply not growing as much as we need to, given how much needs to be done,” she said. “Fiscal space has been eroded, debt levels are rising everywhere and debt servicing costs are rising, but the demands on public funds are high.”
Georgieva defended the agency’s involvement in climate-related issues, food security and health issues.
“As the world around us is changing, it is inevitable that the role of the fund must change,” she said. After the outbreak of the new crown epidemic, “the most important economic policy at that time was to keep the health policy in good condition so that it could operate efficiently and effectively.” She also believes climate shocks will have consequences for economic and financial stability.
Georgieva has pushed back against criticism of her agency’s oversight of countries such as Argentina and Pakistan, which have repeatedly turned to Georgieva for support, sometimes simply to repay loans from the International Monetary Fund.
Shen Dawei said last month that repeated extensions of the loan program without meaningful reforms “undermined the credibility of the IMF”.
Georgieva said it was important for the fund to provide aid “in an empathetic manner”, while agreeing that lenders could not help countries that were “unwilling or unable to take the necessary measures”.
She added: “In a world with more tension, more social pressure, more rejection of the concept of isolated elites, we must work to understand people’s priorities.”
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