March 28, 2008

AFP

WASHINGTON - The International Monetary Fund's executive board on Friday will weigh a proposed voting rights reform, aimed at raising the developing world's voice but already criticised by experts as inadequate.

The reform package is the first major test of IMF managing director Dominique Strauss-Kahn, who took office in late September pledging to restore legitimacy to a heavily criticised institution that is losing relevance.

The proposals on the agenda of Friday's board meeting call for the developed countries to give up a fraction of their voting rights - equivalent to 1.6 percentage point - to the benefit of the emerging and developing countries, according to an internal document.

Under the terms of the proposal, developed countries would have 57.9 per cent of the voting rights, compared with the current 59.5 per cent, while the emerging and developing countries would see their share rise to 42.1 per cent, from 40.5 per cent, the nearly 50-page document said.

A rebalancing of voting rights at the six-decade-old institution was launched more than two years ago and is expected to be completed at the IMF annual meetings on April 12-13 in Washington.An initial reform was decided at the IMF annual meeting in September 2006, in Singapore.

The internal IMF document said that if the proposals are combined with what was negotiated at Singapore, the total amount of voting rights transferred to the developing and emerging countries would amount to 2.7 percentage points.IMF economists devised a complex formula to arrive at the adjustment.

First the basic voting rights of each 185 member country are tripled, a move that particularly benefits the poor countries, mainly in Africa.

Then a new quota formula is applied to each country, which reduces the domination of the Group of Seven richest countries, especially the United States and Europe.The package includes a series of 'other elements' clearly aimed at securing the support of the most influential emerging countries, such as China, India and Brazil, in boosting the voting rights accrued under the new quota formula.

The reform measures, however, remain largely inadequate, experts said.

'The proposed reforms fall far short in addressing the challenges facing the IMF in its evolution toward a truly global institution with more balanced and inclusive representation and voting power,' eight influential experts based in Washington said in a joint letter on Wednesday to the IMF executive board.