IMF backs China’s reforms for greater voting power

The IMF’s chief, Kristalina Georgieva, has advocated reforms that might eventually give Beijing greater voting power within the fund, warning of “devastation” if the agency does not have the financial resources to help suffering nations.

“The IMF should properly portray developments in the global economy over the last decade, including China’s ascent,” Georgieva told the “Financial Times.”

“There is a need to continually modify to reflect how the world economy is developing,” she added.

Georgieva expressed optimism about the improvements in voting power, noting that she was heartened by “how the fund has been able to mobilize and overcome differences in viewpoints so many times since [Covid-19] struck.”

Historically, each IMF member nation has a quota depending on its role in the global economy, which dictates contributions to the fund as well as voting weight within the institution and access to emergency finance.

Despite its higher percentage of global GDP, China’s quota is now lower than Japan’s. As the IMF’s largest shareholder, the United States has veto authority on quota decisions, which require 85 percent approval.

The IMF’s board of governors evaluates quotas every five years, at the very least. It last agreed to make adjustments in 2010. China’s economy has risen significantly since then. The modifications went into effect in 2016.

Speaking ahead of this month’s IMF and World Bank meetings in Marrakech, Georgieva confirmed that adjustments to voting weights were not on the agenda for the current quota review, which is set to conclude in December.

Georgieva’s request for a longer-term reconsideration of IMF participation comes amid a US attempt to strengthen Washington-based international organizations in order to expand Western influence in emerging and developing countries.

It also comes as she attempts to increase her institution’s resources to deal with global economic difficulties.

“We are at the hub of the global financial safety net. If the fund is unable to come up and provide trust for others, the economic, social, and security devastation can be tremendous,” she explained.

As part of the present drive for increased resources, the US wants to enhance member nations’ quotas without immediately reallocating voting privileges, as well as make governance improvements to give poor countries more prominence.

“Such modifications have the approval of a “very healthy majority” of the fund’s membership and will allow it to remain “strong for the future,” according to Georgieva.