The keys to ignite the growth of world economy now are undeniably in the hands of dynamic emerging economies. India, therefore, has reminded the International Monetary Fund (IMF) and the World Bank (WB) that there could not be any turning back on committed IMF reforms. The core issue however is the ‘quota reforms’ in the global financial institutions.
IMF reforms –
The Finance Minister gave a timely reminder that the reformed quota shares in the IMF must align with the strength of the dynamic emerging economy countries. Indeed, IMF reforms in quota share in IMF were agreed to be completed by 2019.
There is no denying the fact that the developed world is struggling to stay on high economic growth seen in the dynamic emerging economies, including India. It has also been evident that the developed world, including the US is resorting to monetary steps to address their economic woes. But rate enhancements by them have been hurting global financial stability.
It’s therefore, incumbent upon the leaders of the financial world to wrap up the IMF reforms in IMF and World. Bank to ensure that the interests of the dynamic emerging economies are not compromised.
What are these IMF reforms?
Quite appropriately, the IMF subsequent to completion of reforms would have all the elected directors on its board. Directors of IMF have the executive powers of the global financial institution. This will be a relief to the world from the current norms where the directors are currently ‘appointed’. (Note – It must be noted that currently top five contributors to the IMF appoint its executive directors. Thus, the current governing structure of the IMF is just a legacy of the past.)
Reforms in the quota shares in IMF will also ensure exit of countries like Canada and Saudi Arabia from top ten within the international lender with consequent entry of truly growing economies in its decision making body.
India and Brazil will enter into top ten club of the IMF following completion of the quota share reform process.
Current position of quota IMF reforms –
The quota reforms had been agreed upon by 188 countries, way back in 2010. Hence, it is rightly a cause for concern. It is well known that the US has been one of the major roadblocks; as Washington is worried about its declining ‘quota’ share. But attempts to not complete reforms in IMF may make US inadequately placed to deal with emerging economic challenges.
The Indian Finance Minister noted that India is firmly perched on high economic growth path which has been demonstrated by robust growth in exports and industrial production numbers. He also diagnosed challenges before the world economy, while noting that low productivity in developed economies gives a worrisome picture.
But the fact that there is a marked tendency for populism in a few countries, which could correspondingly cause trade loss, he, therefore, argued that multilateral cooperation must be fostered to encourage fair trade practices to help the world economy firmly climb up on the path of healthy growth.
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