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India & other developing countries get more voting rights in the IMF

India & other developing countries get more voting rights in the IMF

The long pending demand of developing and emerging economy for reform in IMF got a boost with the shift of voting shares from developed to emerging economies. The reforms came into effect on 27.01.16. The emerging and developing economies gained more influence in the governance architecture of the International Monetary Fund. India’s voting rights increased from the current 2.3% to 2.6% and China’s from 3.8 to 6%, as per the new division. Russia and Brazil are the other two countries that gain from the reforms.

IMF reforms were agreed upon by its 188 members in 2010, in the aftermath of the global financial meltdown, and its delay was mainly due to delayed approval by US Congress. The U.S Senate approved the changes in December 2015, paving the way for the implementation of the reforms.

HIGHLIGHTS OF REFORM:

  • More than six per cent of the quota shares will shift to emerging and developing countries from the U.S. and European countries.
  • The combined quotas — or the capital countries contribute — doubles to about $659 billion from about $329 billion. This will fortify the IMF’s ability to respond to crises more effectively.
  • S voting share will marginally drop, from 16.7% to 16.5%, though the country still holds a veto power. Republicans were against declining U.S power.
  • For the first time, the IMF’s Executive 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, a position that will cease to exist.
  • The reforms bring India and Brazil into the list of the top 10 members of IMF, along with the U.S, Japan, France, Germany, Italy, the United Kingdom, China and Russia. Canada and Saudi Arabia slip below the top ten in the process.
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