Pranab asks West to loosen grip

New Delhi
Oct. 6: The finance minister, Mr Pranab Mukherjee, on Tuesday asked the developed world to recognise the role of developing countries as drivers of future global economic growth and give them greater voice in the World Bank and the IMF.
Speaking at the plenary session of the annual meeting of the World Bank and the IMF in Istanbul, Mr Mukherjee, said that any resistance to the overdue change “will only detract from the legitimacy, credibility and effectiveness of these institutions.”
“The IMF and the World Bank cannot emerge from the crisis unchanged. They have to enhance their legitimacy to perform their expanded roles and mandates effectively. Far reaching changes to the governance structure of the international financial institutions (IFIs) are needed to reflect the changing dynamics of the global economy,” said the finance minister.
As a first step, he said the early ratification of the April 2008 package of quota reforms for the IMF is an urgent requirement. “The next quota review should be completed by January 2011. To preserve the IMF as a quota-based institution, at the minimum, there should be a doubling of quotas,” said Mr Mukherjee.
He said that parity in the vote shares of developed and developing countries would greatly enhance the legitimacy of the IMF. “This can be achieved through a seven to eight per cent shift in quota shares. Even to achieve the shift of at least five per cent called for by the G20 leaders in Pittsburgh, we would have to work beyond the current quota formula,” he said.
He said the other aspects of governance reform should follow and flow from the quota rebalancing. “Enhanced political engagement of ministers in the IMF-related issues is best achieved through improvements in the functioning of the International Monetary and Financial Committee. The chairs in the executive board should be redistributed on a more equitable basis amongst the regions.”
He suggested that the realignment should be based on World Bank specific parameters. “Economic weight with primacy to GDP-PPP (Purchasing Power Parity) should be the main criteria,” he said.