IMF –World Bank Annual Meetings
Spotlight on IMF reform and globalization in
Economic and financial policymakers, bankers, and
other business and opinion leaders from around the world converge on Singapore
September 14–20 for a series of formal sessions and informal gatherings and
seminars centered on the Annual Meetings of the Boards of Governors of the IMF
and the World Bank. Ministers, central bank governors, and officials from 184
member countries will review developments in the global economy and assess
progress in implementing a new medium-term strategy for the IMF that was
endorsed in April. They are expected to give the go-ahead to proposals for a
phased reform of the global institution’s governance structure.
Merlion Park is named for the half-lion, half-fish sculpture that
is Singapore’s national icon.
It is the first time since the 1997–98 Asian financial crisis that the meetings
are being held in Asia. Close to 16,000 delegates and observers are expected to
attend the meetings, which are being held in the Suntec Singapore International
Convention and Exhibition Center. Since the crisis, the world’s most populous
region has bounced back sharply. Asian growth is forecast at 7¼ percent in 2006
and 7 percent in 2007. Global growth is also strong, despite high oil prices,
and credit outstanding to the IMF is at a 25-year low—partly reflecting the
relatively rosy international picture.
Heavy security will be in place throughout the island state
of 4.5 million people, which is an important business and trading hub for the
region. The week’s events get an early start on September 12 with the release of
the IMF’s Global Financial Stability Report, which provides semiannual
assessments of global financial markets and addresses emerging market financing
in a global context, followed on September 14 by the release of its World
Economic Outlook, which analyzes global and country growth trends.
A series of meetings and seminars will be capped by the
two-day plenary session of the Boards of Governors of the IMF and the World Bank
that will be opened on September 19 by Singapore Prime Minister Lee Hsien Loong,
following the meetings of the IMF’s main advisory committee of governors, the
International Monetary and Financial Committee (IMFC), on September 17, and the
joint IMF–World Bank Development Committee on September 18. Ministers and
central bank governors from the Group of Seven industrial countries are also
scheduled to meet in Singapore.
Implementing the strategy
The Singapore meetings will take up several issues central
to IMF Managing Director Rodrigo de Rato’s medium-term strategy for the Fund.
The strategy is designed to redirect the institution’s work to strengthen its
effectiveness. Key issues include reform
of the governance of the Fund, especially the
representation and voice of member countries; adapting the IMF’s surveillance so
that it can be more effective in addressing risks to financial stability and
economic growth, including by sharpening the focus on financial sector and
exchange rate issues, and international spillovers; and creating a new financing
instrument for emerging markets to use if capital market conditions suddenly
For low-income countries, following implementation in
January 2006 of the Multilateral Debt Relief Initiative for 19 of the poorest
countries, the focus will be on helping governments make the best use of
The Executive Board has recommended to the IMF Board of
Governors a package of reforms on quotas and voice in the IMF to better align
the Fund’s governance regime with members’ relative positions in the world
economy and to make it more responsive to changes in global economic realities.
Equally important, the package also seeks to enhance the participation and voice
of low-income countries in the IMF. The Board of Governors is being asked to
vote on the package of reforms by September 18, in time for the Annual Meetings
Commenting on the package, Managing Director Rodrigo de
Rato said, “the Executive Board’s decision represents an endorsement of
fundamental reform that will enable the Fund to evolve to meet the challenges of
a changing global economy. To meet global challenges, we need to make sure the
voice and representation of members is appropriate and the system that
determines governance of the Fund is as transparent as possible.” The quota and
governance reforms are designed as an integrated two-year program that should be
completed no later than the Annual Meetings in 2008. The reform package consists
of the following elements: initial ad hoc increases in
quotas for a small group of the most underrepresented countries comprising
China, Korea, Mexico, and Turkey; a work program after Singapore involving
agreement on a new formula to guide the assessment of the adequacy of members’
quotas in the IMF; a second round of ad hoc quota increases based on the new
formula; and an increase in the basic votes that each member possesses to ensure
adequate voice for low-income countries in the IMF.
A member’s quota determines its financial commitment to the
IMF, plays an important role in determining its voting power, and has a bearing
on its access to IMF financing (see box).
Stepping up surveillance
While the global economy is strong, the IMF has been taking
steps to improve its regular surveillance of economic and financial developments
at the global, regional, and national levels.
Analytical tools are being bolstered, and the IMF has added
a new vehicle—multilateral consultations—to help resolve issues of systemic or
regional relevance. De Rato is likely to brief governors on progress in the
first consultation, which is focusing on how to address global current account
imbalances while maintaining robust global growth. These imbalances are seen as
most likely to be unwound in a smooth, market-led way, but also to be
potentially dangerous for the world economy.
As part of this first multilateral consultation, IMF staff
have held initial talks separately with China, the euro area, Japan, Saudi
Arabia, and the United States on how to curb the imbalances while maintaining
global economic growth.
In the coming months, it is envisaged that the IMF will
organize multilateral talks jointly with the five participants. But de Rato has
cautioned that the imbalances cannot be resolved swiftly. “Global imbalances are
a complex problem that took many years to build up; it would be unrealistic to
expect the problem to be resolved through a magic bullet.” Also on the agenda is
contingent financing. The IMF is looking at ways to adapt its financing
facilities to the evolving needs of emerging market countries. Many of them have
in the past been big borrowers from the Fund, but have recently not needed to
borrow IMF resources. De Rato said in a speech at the Brookings Institution on
September 5 that it was important that emerging market countries still be able
to come to the Fund if financial market conditions worsen. “For this reason, I
have proposed that we develop a new instrument to provide liquidity for emerging
market countries that have strong fundamentals but remain vulnerable to shocks.”
Reviving trade talks?
As for the stalled Doha trade talks—a topic likely to
surface in Singapore—de Rato said, in a September 8 speech in Calgary, Canada:
“there is now a need to ensure that the current impasse marks a brief pause,
rather than a collapse, in the negotiations.” He called for pro-trade voices to
be heard more loudly. “It is untenable, for instance, that in rich countries,
farm interests that account for less than 4 percent of employment are
effectively able to block a deal to open new markets for services and
manufactures, which account for over 90 percent of employment,” de Rato
IMF External Relations Department
|Why is a country’s IMF quota important?
A country’s quota in
the IMF determines how much it must deposit at the IMF as a capital
subscription, and how much it can borrow under the IMF’s various facilities
and policies when it has a balance of payments need. It also plays a role,
together with basic votes, in determining voting power in decision making at
• Subscription. A member must pay its subscription in full on joining the
Fund: up to 25 percent of its quota must be paid in the Fund’s unit of
account, called special drawing rights (SDRs), or widely accepted currencies
(such as the U.S. dollar, the euro, the yen, or the pound sterling); the
rest is paid in the country’s own currency.
• Voting power. Each IMF member has 250 basic votes plus one additional
vote for each SDR 100,000 of its quota. Accordingly, the United States has
371,743 votes (17.1 percent of the total), and Palau has 281 votes (0.013
percent of the total).
• Borrowing. The amount of financing a member can obtain from the IMF
(its access limit) is based on its quota.For nonconcessional lending, a
member can borrow up to 100 percent of its quota annually and 300 percent
cumulatively.However, higher access may be granted in exceptional
Basic votes are intended to ensure that all members, however small, have
some weight in influencing the Fund’s policies and operations. But because
basic votes have not changed since the IMF was established, while
quota-based votes have risen through several general increases in quotas,
basic votes as a proportion of total votes have steadily eroded. Basic votes
now account for 2.1 percent of total votes, compared with 11.3 percent in
1945 and a peak of 15.6 percent in 1958.
The IMF’s Thirteenth General Review of Quotas is scheduled to be
completed by January 2008.