G20 LEADERS ENDORSE IMF REFORMS

G20 leaders have given their backing to sweeping reforms designed to give emerging economies such as China a bigger say in the IMF.

The leaders of advanced and emerging economies announced on Friday they were delivering “a modernised IMF that better reflects the changes in the world economy through greater representation of dynamic emerging markets and developing countries”.

The reforms would enhance its “legitimacy, credibility and effectiveness, making it an even stronger institution for promoting global financial stability and growth”, the G20 leaders said in a summit declaration in Seoul.

The IMF”s executive board had agreed to the changes -described as “historic” by managing director Dominique Strauss-Kahn -at its own meeting last week.

They create “the biggest-ever shift of influence in favour of emerging market and developing countries”, Strauss-Kahn said then.

The fund, formed after World War II to remake the world financial system and prevent a 1930s-style Depression, has long been dominated by Western powers but has faced growing calls to adapt.

The deal to reform its 24-member board of governors was thrashed out by G20 ministers last month ahead of this week”s summit.

Europe has agreed to give up two seats. Just over five per cent of voting rights will be transferred, and Brazil, Russia, India and China will all be among the top 10 IMF shareholders.

China will become the third-largest shareholder, with a nearly 6.4 per cent quota - up from three per cent, which had put the country in sixth place.

The total size of the quotas - the contributions of the 187 member states to the fund”s capital - will be doubled, to $US756 billion.

G20 leaders, as part of efforts to rebalance the world economy, also tasked the IMF with advising on proposed “indicative guidelines” to help identify large current account imbalances that require corrective action.

“We will not have any way to force countries to implement our guidelines,” Strauss-Kahn told reporters on Friday in Seoul.

“We have no police, no army. The strength of the IMF relies on the strength of the truth. The IMF is not going to be the dictator of the world economy”.

Upon his arrival at the IMF in 2007, Strauss-Kahn made quota redistribution a top priority, to resolve a long and bitter battle by emerging-market and developing countries to wrest greater power.

When a previous quota reform plan was officially adopted by member states in April 2008, he hailed it as “the beginning of the new legitimacy of the fund”.

But that reform has not been enacted due to the lack of a sufficient number of ratifications by member states.

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