Is the IMF ready for reform?

The head of the International Monetary Fund (IMF), Kristalina Georgieva, has told the Financial Times she would back reforms around IMF voting.

Why? In theory, IMF members earn voting power in the organisation based on their relative share of the global economy, but in practice:

  • 🇺🇸 The US (15.3% of the global economy) has a 17.4% voting share
  • 🇩🇪 Germany (3.2% of the global economy) has a 5.6% voting share
  • 🇮🇳 India (7.47% of the global economy) has a 2.75% vote, and
  • 🇨🇳 China (18.9% of the global economy) has 6.4% of the votes.

While the IMF is supposed to review these voting shares every five years, the last time its Board of Governors approved new arrangements was in 2010.

And what’s happened since 2010? 

India’s economy has more than doubled, while China’s has nearly tripled. And China has moved to carve out its own space in the international financial system by launching a development bank (and other programs).

Intrigue’s take: If you wanted the IMF to better reflect the modern world, China’s underrepresentation seems a fair enough place to start.

But the US (which has IMF veto power) has hinted it’ll block such measures so long as China fails to respect the IMF’s “roles and norms”, a veiled reference to criticism that China has hampered IMF efforts to ease the debt burden on poor countries.

So maybe a US veto will be the carrot China needs to adjust its approach to the IMF. Or… maybe it’ll be the stick that pushes China further away.

Also worth noting:

  • The IMF has a December deadline to complete its voting review.
  • A recent IMF visit to Sri Lanka reportedly saw the IMF deny further bailouts until China grants Sri Lanka debt relief. Sri Lanka’s president apparently plans to raise this soon with his Chinese counterpart.
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