US foot-dragging on reforms to the institution had blocked changes meant to give more voting power to BRICS and other emerging economies, frustrating countries around the world [Xinhua]
US foot-dragging on reforms to the institution had blocked changes meant to give more voting power to BRICS and other emerging economies, frustrating countries around the world [Xinhua]

The IMF’s 2010 quota and governance reforms have finally become effective and will give emerging markets like BRICS more power and greater say at the lender of last resort.

“The conditions for implementing the International Monetary Fund’s 14th General Quota Review, which delivers historic and far-reaching changes to the governance and permanent capital of the Fund, have now been satisfied,” the IMF said in a statement.

China will have the third largest IMF quota and voting share after the United States and Japan, and India, Brazil and Russia will also be among the top 10 members of the IMF.

The reforms were approved by the IMF’s Board of Governors in 2010. US foot-dragging on reforms to the institution had blocked changes meant to give more voting power to BRICS and other emerging economies, frustrating countries around the world.

These reforms will double the IMF’s quota resources and reallocate the quota. That meant reducing the role of advanced European countries and Gulf states, and increasing that of emerging nations, particularly China.

The IMF said the actual quota increases under the 14th review “are expected to come into effect in the coming weeks” after the IMF Board Reform Amendment entered into force on Tuesday, which was part of the broader package of quota and governance reforms.

“The entry into force of these reforms will reinforce the credibility, effectiveness, and legitimacy of the IMF,” the IMF said.

“The reforms represent a major step toward better reflecting in the institution’ s governance structure the increasing role of dynamic emerging market and developing countries,” it added.

China and the other BRICS countries meanwhile, have launched a $100 billion New Development Bank (BRICS Bank) and the China-led Asian Infrastructure Investment Bank,  the first major global financial instruments independent from the Bretton Woods system.

Christine Lagarde, managing director of the IMF, on Wednesday commended members for ratifying these historic reforms.

“These reforms will ensure that the Fund is able to better meet and represent the needs of its members in a rapidly changing global environment,” Lagarde said in a statement.

“Today marks a crucial step forward and it is not the end of change as our efforts to strengthen the IMF’s governance will continue,” said Lagarde.

Following the implementation of the 14th General Review of Quotas, focus will now turn to the 15th review and securing a necessary broad consensus, including on a new quota formula, the IMF said.

Four emerging market countries (Brazil, China, India, and Russia) will now be among the ten largest members of the IMF.

China’s voting share at the IMF now increases from 3.8 per cent to 6 per cent.

The US’s share decreases only marginally from 16.7 per cent to 16.5 per cent.

A Bloomberg editorial however says China has still not assumed its rightful place at the global governance table.

“For one thing, the new distribution of voting shares still doesn’t do justice to China. Though the U.S., too, has a smaller say than its share of the world economy warrants, the gap between China’s economic might and its IMF influence is bigger,” writes Leonid Bershidsky.