Nancy Birdsall
2008-04-09 07:00:00.0
Current rank: Not ranked

WASHINGTON -

The International Monetary Fund will be considering formally ... a pack of governance reforms — most notably a proposed change in quota shares and thus voting power among members. The change is meant to give developing countries, especially China, India and other fast-growing emerging market economies, and developing economies as a group, more votes and a bigger stake in the IMF’s future.

I have had several questions from reporters about the merits of the proposed changes, some in response to my signing with seven other think tank colleagues ... a letter expressing concern that the proposed reforms fall far short of what’s needed to ensure legitimacy and effectiveness at the IMF in a rapidly changing global economy.

The discussion about quota changes (and the formula for quota changes) is exceptionally arcane. ... The much-fought-over formula (over two years of negotiations) provides no basis whatsoever for somewhat more automatic and less politically contentious adjustments in the future to reflect the growing weight of the developing world. Is there any hope for a breakthrough on IMF governance? Dominique Strauss-Kahn, head of the IMF, tried to put the idea of double majorities on the table of reform just prior to his arrival less than one year ago. That idea deserves more attention.

Why? Double majority voting provides the big creditor countries (U.S., Europe, etc.) effective negative or veto power on key issues, while providing developing economies some positive power to move the fund forward.

Positive power derives from the kind of coalition building, deal making and trading on key issues that are required to get a majority of countries (or board members) as well as votes, and might help generate the consensus building that would restore to the IMF its role as a global venue on global financial issues.

Read more at www.cgdev.org.