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G20 finance ministers to discuss IMF reform

April 08, 2014, 12:26 UTC+3 MOSCOW
IMF quota system reform and situation in developing countries will be on top of the agenda at meetings of the finance ministers and heads of the central banks of the Group of Twenty that will be held in Washington D.C. on April 9 - 11
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Managing Director of the International Monetary Fund Christine Lagarde

Managing Director of the International Monetary Fund Christine Lagarde

© AP Photo/Rob Griffith

MOSCOW, April 08. /ITAR-TASS/. Reform of the quota system of the International Monetary Fund (IMF) and the situation in developing countries will be on top of the agenda at meetings of the finance ministers and heads of the central banks of the Group of Twenty (G20) that will be held in Washington D.C. on April 9 - 11.

A source in the Russian delegation told reporters that the settlement of the IMF reform issue cannot be delayed any further. “Many countries are unlikely to agree once again with the suggestions to wait a little longer to give the American partners an opportunity to decide something at their level,” he said. “It’s obvious that now, taking into account the unsuccessful attempt to include the amendment in the latest bill (on IMF reform), the US administration will not have another opportunity to raise this issue earlier than November.”

Strengthening role of countries with emerging markets

The IMF reform plans had been approved in 2010 at the G20 leaders’ summit in Seoul. They are aimed at strengthening the role of the countries with emerging markets in the management of the organization. In particular, according to the plans, Russia, Brazil, India and China should join the ranks of the Fund’s 10 largest shareholders. However, the reform is stalled so far because the US Congress has not approved it.

“The situation is difficult. On the one hand, the American partners say that they have been making and are making all possible efforts to break the deadlock, but still there is no progress,” the source in the Russian delegation continued. “On the other hand, we are already letting down the G20 itself and the leaders who made a clear-cut concrete decision back in 2010.”

Not the first delay of IMF reform

The delegation representative recalled that it was not the first case of delaying the IMF reform by the United States. “There have been precedents when decisions that require approval by the United States were delayed for years - when amendments were introduced last time to the agreement, providing for the distribution of an additional volume of SDR (Special Drawing Rights) to the countries that did not have them. All the countries were ready for this decision by the end of 2001, but because of the US position, this decision was approved only in 2009, in the midst of the crisis,” he specified.

In the view of the Russian delegation representative, it is not the moment now for repeating this experience and waiting for seven or eight years when the US internal political situation allows expediting this issue. “It’s another matter that at the moment nobody has formulated any options or proposals to overcome this situation, on the path for the G20 to follow,” the delegation source complained, adding that the IMF issue was also put on the agenda of the meeting of the finance ministers of the member countries of the BRICS group (Brazil, Russia, India, China and South Africa). According to him, Russia has several variants of action for the problem settlement, but it is premature so far to voice them.

Situation in Ukraine

The source particularly stressed that “the G20 agenda does not include the issue linked with the situation in Ukraine.” “The issue will be raised in one or another manner - in terms of the risks that the crisis in the Ukrainian economy may create for the region in general,” the source said.

According to the representative, this is a traditional approach, and the financial crisis in Greece had been discussed in the same context. “The fund has not presented any drafts of the program, so a detailed discussion of this matter is unlikely,” he added.

Emerging markets

In addition, most discussions will be devoted to the problems and situations in countries with emerging markets. “As it is already obvious now that many are facing problems, and not all these problems are caused exclusively by the Federal Reserve System (FRS) policy, many questionable decisions are made by the national authorities themselves,” he explained. The G20 financial meeting will discuss various possibilities of overcoming crisis situations that emerging markets may face. “Despite the resuming growth in the United States and positive trends in Europe, it is obvious that the developed economies will not be able to cope with the situation on their own without support,” the source said.

The meeting agenda does not include tax issues. “The current task is to prepare all the necessary decisions, and the main discussion with concrete proposals for the leaders will be held in autumn,” he said. The session on investment will be a working discussion without breakthrough decisions.

Distribution of seats at Financial Stability Board

The finance ministers will also exchange views on fairer distribution of seats at the plenary session of the Financial Stability Board (FSB). “Possibly, there will also be the issue linked with strong requests of a number of emerging markets regarding a fairer representation of the counties at the FSB plenary sessions, as a number of countries have three seats, some - two seats and some have just one seat,” the source said.

According to him, South Korea, South Africa, Argentina and a number of other countries have recently been raising the issue of additional seats in the FSB. “The issue has a political tinge, and at the level of the FSB these decisions will not be finally taken, so the ministers will be able to exchange views on this matter, in order to take decisions by the end of the year,” he said. “So far there is no unequivocal general consensus on the total number of seats available at the table, because it is impossible to expand the number of the discussion participants indefinitely. Who will have to cede their seats in favor of the emerging markets is also an open question so far.”

Russia at present has three seats on the Financial Stability Board.

A separate meeting of the BRICS finance ministers is expected to focus on the issue of the creation of a union bank and a pool of regional currencies.

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