In December, the IMF will review the distribution of countries’ quotas for borrowing funds

In December, the International Monetary Fund (IMF) is due to agree on reforms to its key mechanism, the allocation of countries’ quotas for borrowing from the fund. Developing countries, whose economies have grown significantly over the past decade, have been talking about the need for changes for many years, but they no longer have quotas and voting rights in the IMF. Their position is now openly supported by the head of the fund, Kristalina Georgieva. However, she immediately admitted that there can be no talk of redistribution of voting rights in the near future. The main goal of the reform is to increase funding.

The head of the Washington-based International Monetary Fund, Kristalina Georgieva, gave an interview Financial Times, in which she supported the idea of ​​revising the formula for the distribution of quotas and voting shares within the organization. “We need to constantly change to reflect how the global economy is changing,” said Ms. Georgieva, noting the increased role of emerging economies in the global ecosystem.

Representatives of developing countries have been trying for many years to achieve a revision of the quota formula, which now depends on the size of GDP (at purchasing power parity) and a number of additional criteria, including the degree of market openness and the size of reserves.

The formula was last revised in 2010, and was finally approved by the organization’s members only in 2016. The new reform will be discussed this month in Marrakech during the fund’s annual meeting, with a final agreement due by mid-December this year.

IMF members are almost unanimous in their support for increasing the size of countries’ contributions to the general fund, which is seen as necessary to overcome large-scale crises in the economy. The stumbling block remains the issue of quota redistribution. These quotas, in turn, determine the number of voting shares a country has in the fund. Now the largest shareholder of the fund is the United States with a quota of 17.43% and a voting package of almost 17%. This gives the States the right to veto any decisions of the fund to revise quotas, because the support of 85% of the votes is required to carry out the reform.

If the quota formula is revised and redistributed in accordance with countries’ GDP, the US quota will decrease to 14.8%, and China’s quota will increase from the current 6.4% to 14.4%.

Thus, China’s political influence in the organization will be virtually equal to that of America. Which, of course, the United States is not going to allow.

According to Ms. Georgieva, due to the unshakable position of the United States, the issue of redistribution of voting shares will not even be considered at the next meeting of fund members in Marrakesh. The Fund will only discuss increasing country contributions and revising quotas on available loans.

Nevertheless, the head of the IMF is confident that sooner or later the United States will have to make concessions in order for the fund to continue to receive adequate funding. “I am confident that we will come to this,” said Ms. Georgieva.

Kirill Sarkhanyants