IMF Survey: G-20 Ministers Agree ‘Historic’ Reforms in IMF Governance

IMF News, October 23, 2010

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Ministers of the Group of Twenty (G-20) agreed on a package of reforms that will shift country representation at the IMF toward large, dynamic emerging market and developing countries.
Quota rebalancing: agreed doubling of IMF members’ quotas—financial stakes that determine voting power—which will shift voting shares toward dynamic emerging market and developing countries.
Executive Board reforms:
- The IMF’s 24-member Executive Board will be reshuffled to raise representation of dynamic emerging market and developing countries.
- There will be two fewer Board members from advanced European countries.
- All Executive Directors will be elected rather than appointed; the size of the Board will remain at 24.

As a result of the quota rebalancing, Brazil, China, India, and Russia move up to be among the top 10 shareholders of the IMF.
The G-20 Pittsburgh summit (September 2009) had targeted a shift in quota share of at least 5 percent from over-represented to under-represented countries using the current quota formula as the basis.
The Gyeongju deal achieves a shift of more than 6 percent in both cases (shift toward dynamic emerging market and developing countries and from over- to under-represented countries).
Current shares at the IMF are roughly a 60/40 percent split between advanced countries and emerging market and developing countries; the reforms shift this balance further toward emerging market and developing countries.

The Gyeongju ministerial meeting prepared the agenda for the full G-20 summit in Seoul on November 11.
The agreement reached at Gyeongju still has to be approved by the IMF’s Board.
Target date for completion of the changes to IMF governance: the IMF-World Bank Annual Meetings in October 2012.

G-20 ministers welcomed the IMF's work to conduct spillover assessments of the wider impact of systemic economies' policies.
Ministers resolved to strengthen multilateral cooperation to promote external sustainability and pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels.
Persistently large imbalances, assessed against indicative guidelines to be agreed, would warrant assessment of their nature and root causes as part of the Mutual Assessment Process (a G-20-led exercise supported by the IMF).
Communiqué call: “To support our efforts toward meeting these commitments, we call on the IMF to provide an assessment as part of the Mutual Assessment Process on the progress toward external sustainability and the consistency of fiscal, monetary, financial sector, structural, exchange rate and other policies.”
The quantitative framework for these assessments is to be developed by the G-20 in time for the Seoul G-20 summit.

Ministers welcomed recent reform of the IMF’s lending facilities, including the enhancement of the Flexible Credit Line and the establishment of the Precautionary Credit Line to strengthen global financial safety nets.
Ministers called on the IMF to continue work to further improve the global capacity to cope with systemic shocks.
IMF Managing Director Dominique Strauss-Kahn characterized the decision as “historic” and the most important decision on IMF governance since 1944, saying it “puts an end to a discussion on legitimacy that had lasted for years, almost decades.”
Strauss-Kahn noted the IMF is “not only a firefighter that provides resources when you have a crisis. It also tries to prevent crises and now has the financial tools to avoid crises.”

The G-20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States, plus the European Union.
Together, member countries represent around 90 percent of global gross national product as well as two-thirds of the world’s population.

Source: IMF Survey: G-20 Ministers Agree ‘Historic’ Reforms in IMF Governance (October 23, 2010).