The International Monetary Fund (IMF) on Wednesday approved historic quota reforms, giving India, China and other emerging economies more voting rights and paving way for governance reform at the multilateral funding agency.
India, China and other emerging economies will now have more voting rights at the multilateral funding agency with the implementation of long pending quota reforms.
The combined quotas (or the capital countries contribute) of the IMF's 188 members will also increase to a combined SDR 477 billion (about $659 billion) from about SDR 238.5 billion (about $329 billion).
With the 2010 IMF quota and governance reforms coming into effect on Wednesday, the four emerging economies - India China, Brazil and Russia - are now among the 10 largest members of the International Monetary Fund.
Besides, more than six per cent of quota shares would shift to dynamic emerging markets and developing countries. It would also mark the shift in shares from over-represented to under-represented IMF members.
For the first time, IMF will strengthen the voice and representation of emerging and developing economies in the institution, reinforce the legitimacy of its decision-making process and equip itself with more permanent resources to better respond to future crises.
''I commend our members for ratifying these truly historic reforms,'' IMF managing director Christine Lagarde said. She noted that a more representative, modern IMF will ensure that the institution is able to better meet the needs of its members in a rapidly changing global environment.
''Today marks a crucial step forward and it is not the end of change as our efforts to strengthen the IMF's governance will continue,'' Lagarde added.
This historic change marks an important step forward for the IMF, as the reforms significantly increase the its quota resources and its ability to respond to crises more effectively.
It would also improve the Fund's governance by better reflecting the increasing role of dynamic emerging and developing countries in the global economy. More than 6 per cent of quota shares will shift to dynamic emerging market and developing countries and also from over-represented to under-represented IMF members.
Four emerging market countries - Brazil, China, India, and Russia - will be among the 10 largest members of the IMF. Other top 10 members include the United States, Japan, and the four largest European countries (France, Germany, Italy, and the United Kingdom).
The 2010 agreement will also enhance the effectiveness of IMF's decision-making, including in its 24-member executive board. For the first time, the IMF's board will consist entirely of elected executive directors, ending the category of appointed executive directors (currently the members with the five largest quotas appoint an executive director).
The category of appointed executive directors (currently the members with the five largest quotas appoint an executive director) will cease to exist. At the same time, the quota shares and voting power of the IMF's poorest member countries will be protected. Moreover, advanced European countries have committed to reduce their combined board representation by two chairs by the next regular election of executive directors that will take place this fall.
These reforms reflect major shifts in the global economy. The 2010 reforms-which built on reform steps in 2008 and followed extensive consultations involving member governments and outside stakeholders-take into account the changing realities of the global economy, and notably the growing weight and role of dynamic emerging and developing economies.
The ratification of the 2010 reforms also clears the way for the Fund to begin the 15th review of its quotas. The 15th review will provide an opportunity to discuss the size and composition of IMF resources and the distribution of quota shares among the Fund's membership.