Sunday, September 20, 2009

IMF reform to be addressed at upcoming G20 summit

Financial Times: IMF reform hope
IMF: U.S. Congress vote marks big step for IMF reform, funding,
IMF Governance- Summary of issues and reform options

The upcoming G20 summit in Pittsburgh may be an ideal opportunity for economic leaders to pursue long-awaited IMF reforms. G20 member nations will be tested on their commitment to international issues during the aftermath of the crisis, at a time when domestic difficulties are still a high priority. On the reform agenda: revised governance and representation of member nations, SDR allocation and improving the Fund’s capacity to respond to international crisis.

International Monetary Fund (IMF) managing director Dominique Strauss-Kahn has high hopes for the reform plan. He expects progress in ongoing efforts to give developing countries greater representation within the IMF and urges the G20 to brainstorm new ways to include poorer countries in the fund’s decision-making process. Strauss-Kahn also estimates that the world’s poorest countries need almost $55 billion in additional external financing over the next two years. The IMF could provide about a third of that, but Strauss-Kahn hopes G20 members will consider stepping up their aid, even perhaps to meet commitments made in 2005 at the Gleneagles summit.

In June of this year, the United States Congress set the stage for IMF reform by passing supportive measures in the Supplemental Appropriations Act for fiscal year of 2009. U.S. endorsement of the reform agenda is crucial, as many of the reform measures will require an 85 percent majority of the Fund’s voting power; and the U.S. possess 16.77 percent of that voting power. In the legislation Congress provided the U.S. administration the authority to move ahead on a number of key measures, including reform of country representation, gold sales, and increased funding for the IMF. Strauss-Kahn welcomed the United States’ initial steps and now looks to the G20 to continue the progress in Pittsburgh.

1. The current allocation of IMF voting power largely reflects the distribution of global economic power. Is there an argument to be made in favor of eliminating this linkage? How could a different distribution of power address both economic realities and fairness concerns?
2. Can G20 member nations be expected to meet their 2005 Gleneagles aid commitments after undergoing severe economic crisis? How much external financing should the IMF realistically expect the G20 to pledge at the Pittsburgh summit?

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