US veto provides fillip to IMF reform
20 Aug 2010
Washington: Keeping commitments made at G-20 meets in mind the United States moved to block a proposal this month to maintain status quo at the International Monetary Fund's executive board. If allowed to continue the status quo would have prevented emerging economies having a greater say at the institution.
The issue assumes importance as the IMF has been given a larger role in global affairs and reform at the institution is more than symbolically important.
According to a US Treasury department spokesperson, a resolution submitted to member countries to maintain 24 seats on the board of directors failed to receive US backing. The board was originally sized at 20 seats but through a special vote, taken every two years, an exception is allowed to be made which maintain current strength at 24.
For this exception to be maintained approval from the US, which is the IMF's largest shareholder, is required in order to cross the 85 per cent voting threshold which is required for passage of the motion.
The US veto will result in fresh negotiations about the composition of the board, where European countries including Belgium and the Netherlands hold nine seats. It was agreed last year at the G-20 summit at Pittsburgh that China and other emerging economies will have more say in the running of the organisation through a transfer of quotas from countries with disproportionate influence.
One of the main barriers to IMF reform is the fact that smaller European countries cling to shares, or 'quotas', far exceeding their current clout in the global economy. China for example has just overhauled Japan as the world's second largest economy and has already overtaken Germany as the world's biggest exporter.