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IMF reform 'key to tackling downturn'

(China Daily)
Updated: 2009-07-09 09:58

CAIRO: The reform of the International Monetary Fund (IMF), which aims at increasing the voting weight of emerging economies including China, India, Russia and Brazil, will be finished within 12 months, Youssef Boutros-Ghali, chairman of the fund's International Monetary and Financial Committee (IMFC) said in an interview with China Daily.

The chairman denied that the United States is resisting the reform, though he refused to reveal who has a "problem" with the change.

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"I am certain that we will not overcome this crisis without a reform of the IMF, especially increasing the representation of developing countries very significantly," he said.

Boutros-Ghali, who is also Egypt's minister of finance, and the first chairman of the IMFC from a developing country, said he is "aiming within the next 12 months", to accomplish the reform of the IMF which focuses on increasing the representation of emerging economies and changing the voting rules of the fund's board.

But he said so far the IMF does not have a concrete schedule for the reform.

"I have to get the approval of 15 countries. Some of them are perfectly happy. Others are not happy."

Boutros-Ghali denied that there was any resistance from the United States, which now holds 17 percent of the IMF's voting rights, giving it an effective veto over any proposal that needs to be approved with an 85 percent vote under current IMF rules.

"The United States is very responsible, they are willing to talk about it and open to suggestions. I have spoken to US Treasury Secretary Tim Geithner, he has expressed willingness to push the issue forward quickly. I have not encountered resistance from the US. I will not tell you where the resistance comes from. But the US is not the problem."

Analysts said that the obstacles may be from some European countries.

Jim O'Neill, chief economist with Goldman Sachs, had pointed out earlier that the BRIC countries (Brazil, Russia, India and China) are a really important part of the global economy. They have more need to have a presence in the IMF than some small European countries.

Considering the reform of the IMF, Boutros-Ghali noted that it would have to address the relative influence of each country and the voting rules.

"(We need to decide ) do we keep a majority of 85 percent (to pass a proposal), giving a veto to a single country, or do we say a majority of 70 percent, or do we reduce the share of a single country," he said.

Boutros-Ghali was elected as the chairman of IMFC at the end of 2008. He has been a member of the Egyptian government since 1993. Prior to becoming minister of finance in July 2004, he held a range of ministerial positions in the areas of international cooperation, economic affairs, and foreign trade.

He said that the current problem for the world economy was how to maintain high growth without continuous stimulus packages.

"The problem now is not how to withdraw the stimulus packages, it is how to restore growth. To save its economy, the United States has to save more. But if the United States saves more, someone else has got to save less if we are to maintain around a 5 percent growth rate for the global economy. This is an equation that needs to be resolved in the coming 2-3 years."

"It is going to be an issue of realigning exchange rates globally."