The dominant emerging economies have pledged billions to the International Monetary Fund. However, those countries, and others, are growing restive at the long dominance of Europe and the U.S., and they are pushing for change that would allow them greater say in the IMF’s workings.
Reuters reported Friday that the G20 would announce enough in pledges to fulfill IMF chief Christine Lagarde’s call for $400 billion in additional funding to combat the European debt crisis. Worries over the possible need of a bailout for Spain or Italy have led to efforts to boost available funds for rescues.
Much of that money would be coming from emerging market nations such as China and Brazil, with the latter determined to extract a commitment from the IMF to provide those countries with a greater voice in governance. Brazil in particular is saying that a condition for emerging markets’ contributions should be new promises to recognize their growing world importance—and that such promises should be written into the G20 communique.
An existing agreement to lower the amount of influence Europe has at the IMF and to raise China to the third most powerful voting position there has been stalled, especially by the U.S.
After a BRICS meeting on Thursday—the nations of Brazil, Russia, India, China and South Africa—Finance Minister Guido Mantega of Brazil was quoted saying, “What we want and demand in every meeting is that this commitment be reaffirmed.”
Mantega is expected to push even harder for that goal in a speech planned for delivery on Saturday before the steering committee of the IMF. In the speech, he is expected to say that it will no longer suffice to pay lip service to the idea that voting reforms are crucial for the effectiveness of the IMF. According to the text of the speech, he will say, “Progress on this front has been limited and slow.”
Canada, too, is rebelling against Europe’s domination of the 24-member board at the IMF. It is championing a procedure that will require two votes for the IMF to decide on uses for the newly contributed funds. One of those votes will be cast by euro zone countries and the second by others, as a means of diluting the power that Europe wields on euro zone matters.
“Given that the major challenge here is a sovereign debt challenge in euro zone countries, and that euro zone countries are asking non-euro zone countries to contribute to resources at the IMF, our view is that there ought to be two votes,” Finance Minister Jim Flaherty of Canada said in the report.