Finance minister Pranab Mukherjee has called for an immediate transfer of 5 to 6 per cent of the developed world's quota share (or voting rights) in the International Monetary Fund and the World Bank to emerging economies to make governance of the multilateral institutions more effective and truly reflective of the current economic realities.
"Governance reform will be central to the legitimacy and effectiveness of the Fund's mandate and we see quota realignment as the central element of governance reform," Mukherjee said in his address to G-24 finance ministers' meeting yesterday.
"Emerging markets and developing countries (EMDCs) now represent 47.5 per cent of the global GDP in PPP terms in 2009. But they have a quota share of only 39.5 per cent. Hence, we call for what we believe is a very modest shift of 5 to 6 per cent in quota shares from advanced countries to EMDCs to better reflect current global economic realities," Mukherjee said.
He said the shift has to come primarily from advanced economies to the EMDCs and not mainly by internal readjustment of quota shares if the Fund is seen to have really changed.
Mukherjee said the IMFC should take a calibrated approach to quota increases based on enhanced role for PPP-based GDP to achieve the desired results. He said the current round of hikes should not also be too large to preclude the possibility of future realignments of quotas.
"The more immediate governance issue, which has to be resolved on a much shorter time frame, is the election of executive directors. We expect the process would result in enhanced representation of EMDCs," he said.