MercoPress. South Atlantic News Agency

IMF two year reform process launched in Singapore

The International Monetary Fund, IMF, agreed Monday on reforms giving China, Mexico, South Korean and Turkey more say in how the multilateral institution is run.

At its annual meeting in Singapore, the IMF's 184 members approved plans to boost the voting rights of the four emerging economies and financial contribution to the body.

The proposal which needed an 85% support was passed with 90.6% of the voting rights.

The IMF's main objective is to ensure global financial stability and to support the international financial system in times of crisis. Its critics had argued that its lopsided voting system meant that it was in danger of losing credibility, with countries either ignoring its advice or turning to other sources of emergency funding. The IMF's existing structure, which effectively gives the US twice the voting rights of any other member, dates back to its foundation in 1945.

Reforms agreed in Singapore will see China, South Korea, Mexico and Turkey all gain greater influence within the IMF.

With the reform China will, in effect, become the IMF sixth most powerful member behind the US with 17,6% voting rights, Japan, Germany, France and the UK. China currently has fewer votes than either Belgium or the Netherlands, even though its economy is twice the size of the two combined.

However the changes are not universally supported and 9.4% of the votes did not approve the reform system including Brazil, Argentina, India, Egypt and a great number of developing countries.

Germany's Finance Minister Peer Steinbrueck described the voting reform as "important and very good".

"These governance reforms are tremendously important for the future of our institution," said IMF managing director Rodrigo Rato, adding that "they will enhance our effectiveness and add legitimacy to all of the other reforms we are implementing."

Brazil's Finance Minister Guido Mantega said he did not oppose the granting of greater voting powers to the four countries but rather the resolution regarding future voting agreements and financial contributions which should be ready by 2008.

According to the resolution in the coming six months Mr. Rato must find a formula for calculating the new voting rights which satisfies all parties.

With this reform China's voting power increases to 3.6% from 2.9%; South Korea to 1.3% from 0.7%; Mexico to 1.4% from 1.1% and Turkey 0.5% from 0.4%.

Critics insist the IMF is dominated by the US and European countries, and poorer nations were under-represented. Quotas determine how much a country can borrow and influence lending policies.