US reluctance forces IMF to put off fresh quota reforms

The International Monetary Fund (IMF)  has put off a decision on  a fresh round of quota reforms by a year till January 2015, since it is yet to effect a change proposed in the previous round.

The IMF on Friday blamed the United States for not meeting the deadline for quota reforms that would have raised the quota share of developing countries by six percentage points. India, which will be a beneficiary of the new structure, has been insistent on carrying out reforms at the earliest.

"Given the delay (of the 14th round), the executive board has concluded that additional time will be needed to complete its work on the 15th review," said IMF, in a press statement here.

CRUX OF THE MATTER

• Fresh round of quota reforms put off till January 2015
• IMF blames the US for not meeting the deadline for quota reforms
• It said 47 of its 188 members had not yet accepted the changes suggested in the 14th round
• US approval is important as 85% votes are needed to implement the reforms and it has about 15 per cent of vote share
• The IMF quota reforms were originally scheduled to be carried out by October 2012

It said 47 of its 188 members had not yet accepted the changes suggested in the 14th round. In this connection, the approval by the United States is important, since 85 per cent votes are needed to implement the reforms and the US has about 15 per cent of the vote share.

"Acceptance by the United States is needed to reach the required acceptance threshold for the Board Reform Amendment," the statement said.

The US Congress is yet to support the reforms even as the White House has requested it.

In the 14th round, developing countries are to see a six per cent increase in their quota share. India's quota share at the IMF will increase from 2.44 per cent to 2.75 per cent, making it the eighth largest quota holding country at the IMF.

As such, its voting share will also  rise to 2.63 per cent of  the total from 2.34 per cent after quota  reforms.

China will become the third largest member country in the IMF, and there will be four countries from BRICS — Brazil, China, India and Russia — among the 10 largest shareholders in the Fund.

The 14th round of reform will also double quotas from approximately SDR 238.5 billion to approximately SDR 477 billion.

Quota of a member determines access to financing from IMF. For example, under stand-by and extended arrangements, a member can borrow up to 200 per cent of its quota annually and 600 per cent cumulatively. However, access may be higher in exceptional circumstances.

India and other developing nations have been pressing for carrying out quota reforms so that IMF represents changing reality in the world order.

Earlier at the IMF committee meeting, Finance Minister P Chidambaram had expressed disappointment over delay in quota and governance reforms, saying those were impacting the legitimacy and effectiveness of the Fund.

The IMF quota reforms were originally scheduled to be carried out by October 2012.