Mumbai: India has opposed a proposal for an ad hoc increase in International Monetary Fund (IMF) quotas (voting rights) of some countries, saying the redistribution formula is 'flawed' and cannot be the basis for reforming the global institution.
The IMF-World Bank annual meeting from September 19-20 in Singapore is expected to finalise a deal to increase the quotas for China, South Korea, Turkey and Mexico in a two-year package.
"It is widely believed that the present quota formula of the IMF is hopelessly flawed. Obviously an ad-hoc quota redistribution based on this flawed formula cannot provide a durable solution," finance minister P Chidambaram said at a meeting of the Commonwealth finance ministers in Colombo. He also called for a greater say for developing nations in running global financial institutions.
"We need a consensus on a new formula. And we need it quickly." Chidambaram said, adding that India has always held that the developing world deserves to have much greater "voice" in the management of the international financial institutions.
"My government firmly believes that any exercise intended to enhance the credibility and legitimacy of the IMF has to be based on fundamental reforms in the quota structure," he said.
Earlier this month, IMF managing director Rodrigo de Rato had said the board of governors meeting in Singapore from September 19 will take up the contentious issue of ad-hoc increase of quota for China, Korea, Mexico and Turkey.
The financial and organisational relationship of each member with the IMF largely decides the quota and voting powers and access to finance.
Current IMF quotas are determined by the size of a country's gross domestic product (GDP), openness to trade and foreign exchange reserves. The IMF board is supporting deeper reform of quotas, to be based on a formula that will be worked out over the next two years.