The International Monetary Fund (IMF) and the World Bank will accelerate reforms in the voting structure of both, to give emerging economies like China, India and Brazil more say in the affairs of the multilateral financial institutions.
However, any changes in the voting rights can only take place after the IMF-World Bank meeting in Spring 2010.
The IMF said it is working on expanding and enlarging the New Arrangements to Borrow (NAB), as well as making it more flexible. Currently, there are 26 participants with credit arrangements in the NAB.
''Increasing the flexibility of the NAB would make it a more effective backstop to quota resources. Both an increase in current arrangements or an amendment to the NAB would require the agreement of current NAB participants representing 85 per cent of total credit arrangements and a decision of the IMF,'' a release issued today said.
In some cases, IMF noted, legislative approval may be needed before participants can agree to increase their credit arrangements or to other significant changes in the NAB.
IMF managing director Dominique Strauss-Kahn said the quota change should reflect the reality of the day.
"I am not saying that the change in quota is not important. They are important to do because the reality of the quota share has to be in line with the reality of the economic life. But it does not reflects directly on China, Brazil and India, who are not waiting for this increase in quota to be listened to in the board of the IMF and I guess in the World Bank," Strauss-Kahn said.
"When Chinese representatives speak, people are not counting the votes, but looking at what China brings to the table.....And that is a combination of its development experiences, its resources, its growing influence, its investment and so in that sense the developing countries are getting their due not because of shares but because of what they have accomplished," said World Bank president Robert Zoellick.
He said it is time to change the shares. "I do believe that China as well as other rising (economies) will be fairly and fully represented," he said while addressing a press conference after the meeting of the Development Committee in Washington on Sunday.
"The committee, therefore, agreed that the work on a second round of reforms to the bank's voting structure should be accelerated. The aim should be to reach an agreement on these changes by the Spring meeting in 2010," Zoellick said.
In order to ensure that the IMF continues to have sufficient resources to meet the growing demands for financial support, the Group of 20 leading economies had at their 2 April meeting agreed to triple the IMF's regular lending capacity from $250 billion to $750 billion.
IMF, however, has a range of options for temporarily supplementing it s resources, including entering into bilateral loan agreements, issuing notes to the official sector, and enlarging existing borrowing arrangements.
A number of members have pledged to make bilateral loans to the IMF, and the possibility to issue notes is also being considered. At the same time, work to expand and make more flexible the New Arrangements to Borrow is underway.
While quota subscriptions from member countries are the IMF's main source of financing, it is also authorised to borrow under its articles of agreement in order to replenish its holdings of currencies in the General Resources Account (GRA) that are needed in connection with its lending transactions.
Through the General Arrangements to Borrow (GAB) and the New Arrangements to Borrow (NAB), a number of member countries and institutions stand ready to lend additional funds to the IMF of up to $34 billion ($50 billion) to forestall or cope with an impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system.
On 13 February 2009, the IMF concluded an agreement with Japan under which Japan committed to lend up to $100 billion (about SDR 67 billion) as a measure to help overcome the current global economic and financial crisis.
IMF can borrow on three different ways to increase the IMF's lendable resources:
1) through bilateral borrowing agreements with members
2) through placing notes in the official sector
3) through enlargement of the multilateral NAB
It can even borrow directly from the private sector, but it would raise a broader range of policy, financial and legal issues that would take more time to address.
The first two options can supplement IMF resources in a timely manner. Enlargement of the existing NAB would allow a broader range of countries to help provide a stronger backstop to the Fund's quota resources.