China, South Korea, Turkey and Mexico could win increases in their International Monetary Fund quotas - or shareholdings - "in a few days", as an early step towards giving big developing countries more say in the institution, according to Rodrigo Rato, IMF managing director.
Mr Rato said agreement to launch a fundamental review of control and governance of the IMF was within sight, signalling the prospect of the most far-reaching reform of the fund since its foundation at the Bretton Woods conference in the US in 1944.
The reform process has been driven by the need to adapt both the governance and role of the IMF to reflect the significant shifts in global economic power, particularly since the rise of Asian and other developing economies.
Mr Rato said he expected to be given a clear mandate to implement a two-stage reform at the fund's annual meeting next month in Singapore. Details of this proposal, which remain confidential, were put to the IMF's governing board last week.
Mr Rato warned against expecting any breakthroughs on global economic imbalances resulting from the IMF's new multilateral consultation process at the Singapore meeting.
But he said agreement could be reached soon on a first stage of IMF reform, with agreement to grant modest increases in the IMF quotas for China, South Korea, Turkey and Mexico. Some countries have been pushing for more such share increases but Mr Rato said: "I think there is consensus for four." But he added that the initial ad hoc quota increase was part of a "package" of measures and was linked to more far-reaching reform to follow in a second stage.
Mr Rato said there was agreement that the second stage of IMF reform would have to address governance and control of the fund, better to reflect "changes in world economic weight" and also to tackle the "representation of low-income countries".
"There is consensus that we should address these in a package of reforms that should be launched at Singapore," he said. Mr Rato said he would aim to complete the process within roughly two years.
The US is pushing for a new IMF formula to determine a country's shareholding based "predominantly" on gross domestic product. Such a formula would raise the relative shareholding of Asian countries and emerging markets, mostly at the expense of small European states. But such countries argue that weight in the IMF should not be based on GDP alone, and criticise the US for seeking to maintain a shareholding large enough to veto key IMF decisions.
Mr Rato said "there is consensus that the existing formula is unsatisfactory" and should be simplified. He said member governments also agreed that the new formula should be based on GDP and openness, and perhaps other criteria, but that so far no consensus had been reached on what weight to give each factor.
Mr Rato said he expected to be given the green light to start work on devising a new formula and an increase in the basic votes of poor countries "immediately after Singapore." - (Financial Times service)
