Fast track governance, raise more money: FM
India wants the World Bank and the International Monetary Fund to speed up governance issues and find more money for developing countries that blew up their buffers to survive the recession. Yashwant Raj reports.business Updated: Oct 10, 2010 21:06 IST
India wants the World Bank and the International Monetary Fund to speed up governance issues and find more money for developing countries that blew up their buffers to survive the recession.
"Governance reform will be central to the legitimacy and effectiveness of the Fund's manadate and we see quota realignment as the central element of governance reform," said finance minister Pranab Mukherjee on Saturday.
He was addressing the Fund's International Monetary and Financial Committee as part of the two-day joint annual meetings of the Fund and the World Bank that ended on Saturday.
The Fund is like a referee who ensures that member nations go by the book when they play the currency games — exchange rates and balance of payments. The Bank is into development work through loans. India is member of both, as are most countries.
Reminding the Fund of its original mandate, Mukherjee asked it to sharpen its surveillance systems. "The first line of defence in crisis prevention is effective and even-handed surveillance." Lending, he told the committee, came thereafter.
A major thrust of his speech was governance reforms at the Fund — to correct the imbalance in quotas that are heavily weighed in favour of rich nations, whose sizeable subscription fee buys them bigger clout — similar to the situation in the United Nations Security Council.
India is leading a efforts to reform both the UN SC and the Fund arguing these bodies must change to reflect the changed ground realities — that developing countries need to be recognised.
To the Bank, Mukherjee said it must ramp up its ability to lend, especially to developing nations that are now extremely low on buffers because of the recession.
"The current lending limit of $ 15 billion is not only insufficient to meet existing demand from client countries, but is totally inadequate to help them if faced with another crisis."
The Bank's lending capacity must be enhanced through innovative meaures, he said.
Currency issue remains
The IMF-World Bank meet concluded without a solution to the currency issue, which is expected to reverberate at G-20 meet next month in Seoul. It was most discussed topic at the meet after the governance reform.
IMF chief Dominique Strauss-Kahn said world economic recovery is uneven. "There is no way global growth could be rebalanced without changing some currency value because ... we are going to have high growth in one part of the world and low growth in another part."
'Reform near completion'
The IMF said it is closer to wrapping up a package of reforms, including shifting quota share by at least five per cent from over-represented to under-represented countries by January 2011.
The reform is will make IMF more representative and better able to tackle the economic problems facing the globalised economy, Dominique Strauss-Kahn said.
India has demanded a revision in quota formula in the IMF based on purchasing power parity.
'Support poorest nations'
The IMF and the World Bank have sought support for the development of the world’s poorest nations.
"When I see rich countries cutting aid lines, I do not believe they are doing the right thing," IMF chief Dominique Strauss- Kahn said.
"Advanced economies have to do what they committed to do."
World Bank President Robert Zoellick called for a "strong" replenishment to the International Development Association, the Bank’s fund for the world's poorest countries, to try to achieve the Millennium Development Goals.