G-20 Leaders Agree to IMF Changes in Pittsburgh

Sources:
Leaders Statement: The Pittsburgh Summit
G-20 Backs Sustained Crisis Response, Shift in IMF Representation
G20 agrees to shift more IMF voting power to developing countries
IMF Standing Borrowing Arrangements

At the G-20 meeting in Pittsburgh, the International Monetary Fund (IMF) was asked to support G-20 efforts under their new “Framework for Strong, Sustainable, and Balanced Growth.” The new framework is designed to help global growth become sustainable and more balanced. To ensure that the framework is supported by even-handed analysis, the IMF has been asked to assist the Finance Ministers and Central Bank Governors by developing a forward-looking analysis to determine whether the policies pursued by individual G-20 countries are consistent with the collective goals. The IMF will report on global economic developments, patterns of growth, and suggested policy changes regularly to both the G-20 and the International Monetary and Financial Committee. Plans to develop this process will take place in November.

The G-20 leaders agreed that the IMF must play a role in promoting global financial stability and rebalancing growth. Both the G-20’s commitment to increase funds available to the IMF and the innovative steps taken by the IMF to create the facilities needed for its resources to be used have reduced global risks. The leaders said the collective response to the crisis has highlighted the benefits of international cooperation and the need for a more legitimate and effective IMF. The G-20 leaders welcomed the reform of IMF’s lending facilities, including the creation of the innovative Flexible Credit Line, and committing over $500 billion to a renewed New Arrangements to Borrow program that provides financing to the IMF.

The IMF’s quota and voice reforms received continued support from the G-20. The reforms are a step toward enhancing the voice and representation of the worlds’ emerging and developing countries. These countries will see a shift in quota share of at least five percent from over-represented to under-represented countries from what is currently a 60/40 percent split. In addition, the G-20 has committed to protect the voting share of the poorest in the IMF. IMF Managing Director, Dominique Strauss-Kahn, said that these efforts will lay a foundation for a deeper partnership in economic policy between emerging and developing countries and advanced economies.

Some analysts are concerned that the reform failed to fully redress IMF imbalances. The poorest countries do not have enough voices, while some of the main emerging countries are still underrepresented. Max Lawson, Oxfam senior policy advisor, said that updating the IMF quota share is not real reform and without changing the IMF voting rules to give poor countries a real say, the IMF will remain the “world’s richest country club.”

Discussion Questions:
1. Do you agree with the G-20’s assessment that the IMF is in the best position to be the policy watchdog?
2. Will the increase in IMF lending capabilities cause harm to the emerging and developing countries that are accessing these funds? What effect will it have on the advanced economies?
3. Will the IMF’s shift in quota share have a positive impact on the partnership between emerging and developing countries and the advanced economies?