[OPE-L] G20: Reform the IMF and World bank

From: glevy@PRATT.EDU
Date: Mon Oct 17 2005 - 15:45:59 EDT

but it's not at all clear which _specific_ reforms they are in favor of.
Still, the fact that they are talking about reform -- even if it turns out
to be empty talk -- might be seen as a response to pressures from the
international anti-globalization movement?  Which reforms will they
actually support?

In solidarity, Jerry

G20 calls for reform of IMF and World Bank
By Andrew Balls and Richard McGregor in Xianghe
Financial Times, October 16 2005

The G20 group of the world's leading rich and developing countries
called for reform of the International Monetary Fund and the World
Bank, to improve their governance, strategy and operations.

The G20 said that the governance of the fund and the bank has not
kept pace with changes in the global economy  notably the growth of
Asian economies, including China and its southeast Asian neighbours.

"The G20 underscores the critical importance of achieving concrete
progress on quota reform by the next International Monetary Fund and
World Bank Meetings in Singapore," its statement at the conclusion of
the weekend meeting said.

IMF quotas determine a country's capacity to borrow from the fund and
also its shares of the votes on the IMF board. It is expected that
reforming the IMF board would pave the way for a similar reform at
the bank.

Finance ministers and central bankers, who met over the weekend in
Xianghe, just outside Beijing, also highlighted the risks to the
global outlook from sustained high oil prices, trade imbalances and
building protectionist pressures.

The G20 members pledged to pursue policies and reforms to reduce
imbalances in the global economy, though there was little discussion
of the specific actions required. The group  which brings together the
leading industrialised countries, large emerging markets and oil
exporters  is seen as more of a discussion forum than a
decision-making body.

The G20 statement said that the risks to the world economic expansion
were on the downside, warning of that the high oil price and trade
imbalances threatened to "exacerbate uncertainties and aggravate
global economic and financial vulnerabilities.

"Bearing in mind our shared responsibilities, we are determined to
implement the necessary fiscal, monetary and exchange rate policies,
and accelerate structural adjustments to resolve these imbalances and
overcome these risks," it said.

The build-up of foreign exchange reserves in Asian countries, which
is contributing to global trade imbalances, is seen in part as
self-insurance against future troubles in financial markets, so that
countries do not have to borrow from the IMF again as they did in the

Rodrigo Rato, IMF managing director, has made the need to increase
Asia's weight in the fund a key part of his own strategic review of
the body, saying that the "legitimacy" of the institution has been
called into question by outdated governance.

Mr Rato's IMF review has received plaudits for making governance
reform a priority but otherwise has received mix reviews, with critics
saying he has raised a number of questions about the role of the fund
while providing few answers. The G20 called for greater clarity in the
roles of the two organisations.

Past efforts to reform IMF quotas have collapsed because large
countries were not prepared to accept a reduction in their overall
share of the votes and some countries continued to resist the reforms
during the weekend meeting, ministers said yesterday.

It is not clear how an agreement will be reached, but the G20 has at
least given the matter greater prominence than it has had in the past.

As well as voting shares, another item on the agenda is
representation on the board. Eight of the 24 seats are filled by
Europeans. The US view is that that the eurozone countries should
consolidate to one seat to allow a more representative board and
reduce the overall number of seats.

The G20 statement also said that the senior management of the IMF and
the World Bank should be selected "based on merit"  but it was
silent on the matter of selecting the managing director of the fund
and the president of the bank, where the jobs are traditionally divided
up by Europe and the US.

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