labels: economy - general, international monetary fund
Chidambaram flays IMF quota reformsnews
19 September 2006

Finance minister P Chidambaram has criticised the changes effected to the IMF quota structure yesterday. "We were not in favour of any ad hocism including the proposed two-stage process based on a hopelessly flawed formula. We believed that all reforms – new quota formula, realigning country quotas, and increase in basic votes – could have been adopted simultaneously as a package", he said.

IMF quotas determine the voting rights of member countries. Quotas are fixed on the basis of absolute GDP size of member countries, financial openness and other criteria.

The IMF members had yesterday voted in favour of an increase in quotas for emerging countries China, Mexico, Turkey and South Korea – to reflect their growing importance to the global economy. India, along with 23 other member countries, had voted against the move. The IMF has a total of 184 member countries.

Chidambaram stated that the the 23 countries that voted against the plan "lost the vote but have not lost the argument. We hold the IMF to their promise."

After the change, India's quota has decreased to 1.91 per cent from 1.95 per cent earlier. Though the IMF has committed to overhaul its quota structure over the next two years, India is unhappy at the reduction in its quota. China's revised quota is nearly double that of India.

India has been asking for a new quota formula that uses the national income calculated in terms of purchasing power and takes into account the need of developing economies to protect their farmers and industries from foreign competition.

The finance minister also criticised the World Bank move to link financial aid for countries and projects to anti-corruption measures and better governance standards.

"We recognise the importance of this issue in the development dialogue. But I would say there is a disproportionate focus on it in the Bank's strategy.

The Bank's mission is "a world free of poverty", and we would be unhappy if the new focus tends to obscure or negate the bank's historical development-centric approach", he said.

"The actions of the global development community are being closely compared against the promises repeatedly made," Chidambaram said.

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Chidambaram flays IMF quota reforms