Calls growing for structural reform of IMF at G20 finance ministers meeting

Posted on : 2015-04-20 17:00 KST Modified on : 2019-10-19 20:29 KST
China-led Asian Infrastructure Investment Bank‘s growth may be attributable to displeasure with longtime US control of IMF
 second from the right) poses for a commemorative photo with other participants in an IMF Governors’ Meeting in Washington D.C.
second from the right) poses for a commemorative photo with other participants in an IMF Governors’ Meeting in Washington D.C.

The growing importance of the Asian Infrastructure Investment Bank (AIIB) as it prepares for launch this year prompted calls for IMF governance structure reform at a meeting of G20 finance ministers and central bank governors in Washington on Apr. 17.

Foreign news outlets suggested the battle for leadership in the IMF poses a potential threat to its dollar-denominated currency system.

The South Korean Ministry of Strategy and Finance reported on Apr. 19 that finance ministers from G20 member countries at the summit issued a joint statement demanding “IMF governance structure reforms” and “interim steps” for adequately reflecting the aims of the reform plans to the IMF Board of Governors.

The move would entail making changes to the different countries’ shares that put them more in line with the terms of the reform plan even without ratification from US Congress, the ministry explained.

An earlier agreement to reform the governance structure to give emerging countries like China, Brazil, and India a greater voice to reflect their larger economic scale was reached at the 2010 G20 summit in Seoul.

A more specific agreement indicated that six percent or more of the advanced economies’ shares would be given to emerging economies. The US currently holds as 17.7% share in the IMF, compared to just 4.0% for sixth-ranked China. Japan ranks second with 6.6%, followed by Germany (6.1%), France (4.5%), and the United Kingdom (4.3%). South Korea’s share is 1.4%, which puts it in 18th place.

But the agreement has been stymied for the more than four years since by the US Congress’s refusal to ratify it. As the IMF’s largest shareholder, the US is the only country with veto power.

The reason the China-led AIIB is drawing such a strong response - with 57 countries participating so far - could have to do with the disproportionate share of the IMF in US and European hands. Indeed, the G24 group of emerging economies made vocal demands at the summit for implementation of the IMF governance structure reform plan.

Foreign news outlets read the change as a result of the imminent AIIB launch. Japan’s Nihon Keizai newspaper reported that the China-led AIIB was “raising hopes at the G20 Meeting,” with “many expressing displeasure with the US for neglecting IMF reforms.”

The report called the situation a “turning point for the US-led international currency system with the IMF and World Bank.”

The BRICS Development Bank, an effort spearheaded by Brazil, Russia, India, and China to counter the US-led World Bank and IMF, is expected to go into operation as early as late this year.

 

By Kim So-youn, staff reporter

 

Please direct questions or comments to [english@hani.co.kr]

 

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Related stories