Sigapore - The International Monetary Fund has agreed to increase the
influence of China, South Korea, Mexico and Turkey within the organization in
acknowledgment of their rising economic strength, its chief said Friday.
The IMF's executive board agreed to increase the four countries' voting
shares as part of a two-year program to reform the IMF's governance, Managing
Director Rodrigo de Rato told journalists in Singapore in a satellite-linked
press conference from Washington.
Voting rights of individual countries in the IMF are determined in part by
the amount of money that they are to put toward the fund, called quotas.
"At present the relative quotas and voting shares of our members do not
adequately reflect the greatly increased economic weight of major emerging
market economies in the global economy," de Rato said, adding China, South
Korea, Mexico and Turkey were "clearly underrepresented."
De Rato also said that while Asia accounted for about a quarter of the
world's gross domestic product, its share of fund quotas was a third less by
proportion _ with China's share of the global GDP 1.5 times its share of fund
quotas and South Korea's portion of the world GDP twice its allocated fund
quotas.
At present, major industrial nations such as the United States, Japan,
Britain, Germany and France have single seats on the IMF's 24-member governing
executive board, while a country like Brazil, South America's largest economy,
shares a seat with eight other countries. The United States is the largest
shareholder in the IMF.
De Rato said the agreement will be submitted to the IMF's board of governors
for approval when the IMF convenes in Singapore in two weeks' time for its
annual meeting. The decision signals recognition that power within the IMF,
created at the end of World War II, no longer accurately reflects the relative
economic strengths of its 184 member nations.
The IMF is expected to discuss other reforms at the multilateral body as well
as consider macroeconomic issues in rapidly developing economies such as India
and China.
The IMF's chief also said the Washington-based body believes that the level
of the Chinese currency, the yuan, should reflect the strength of the Chinese
economy.
A stronger yuan would help China achieve sustained economic growth, bolster
domestic consumption and make investment more efficient, de Rato said.
De Rato also said some inflationary pressures are building in India, with the
country having enjoyed above-trend growth of 8 percent in the last three years.
His comments come after the Reserve Bank of India said earlier this week the
outlook for inflation is "clouded," prompting talk of a rate hike in October.
In July, the Indian central bank said it expected inflation in the fiscal
year ending in March 2007 to average between 5 percent and 5.5 percent.
More broadly, de Rato said: "For Asia, with growth remaining strong, some
modest rebalancing of growth is likely, as exports moderate with slowing global
growth and domestic demand strengthens."
The region's business environment needs to become more attractive with more
efficient financial integration and to attract more investment, he said.
The world economy needs to adjust to high oil prices and to reassess policies
such as subsidies, de Rato also said.
That will also require better safety nets as well as social and labor reforms
to help individuals cope with the changes, he said.
