India's call for a bold shift of power in the International Monetary Fund (IMF) from the rich to developing nations to restore its credibility after the global financial crisis has found resonance in the Group of 24.
"The IMF's legitimacy, relevance, and effectiveness in implementing its mandate depends critically on addressing the imbalance in voice and representation," the G24 finance ministers and central bankers said in a communiqué on Thursday.
The document issued after a meeting ahead of the IMF-World Bank annual meetings here called for a "significant" realignment of IMF quotas to bring about a shift of at least 5 percentage points from advanced economies to emerging markets and developing countries (EMDCs).
Earlier, addressing the grouping, Indian Finance Minister Pranab Mukherjee said: "These changes can enhance the fund's credibility, only if, bold and forward-looking quota and governance changes are implemented, which will restore the fund's legitimacy."
"The burden of the quota shift to EMDCs has to be borne primarily by advanced economies," he said calling for a "very modest shift of 5 to 6 per cent in quota shares" to them "to better reflect current global economic realities."
Mukherjee, who is second vice chair of the group that concerts the position of developing countries on monetary and development finance issues, said the Fund and the Bank need to perform their respective mandates very effectively.
Noting that emerging markets and developing countries "now represent 47.5 per cent of the global GDP in PPP terms in 2009, but have a quota share of only 39.5 per cent," he said: "We see quota realignment as the central element of governance reform."
As the "World Bank is stretched to the limit and needs more resources to be a multilateral buffer for poorer countries," Mukherjee called for "an ambitious IDA16 replenishment with out-of-the box thinking to make it more sustainable in the long run."
"The Bank needs to continue to maintain its core focus on poverty alleviation without a proliferation of goals," he said asking it to "focus on providing access to energy to all at the cheapest cost in the context of climate change and to refocus on agriculture and infrastructure."
The G24 ministers also reiterated their call that the heads of the IMF and the World Bank must be chosen on the basis of an open, transparent, merit based process without regard to nationality beginning with the next elections.
They warned that low interest rates in industrial nations are driving capital into emerging markets, leaving them vulnerable to exchange rate appreciations and overheating.
"The prospects of sustained low interest rates in the advanced countries have contributed to a surge in capital flows to some emerging markets, putting upward pressures on exchange rates, creating overheating pressures, and carrying risks of increased vulnerabilities and reversals," the group said.
The group asked IMF to respond by strengthening its monitoring of such flows and to "consider options for mitigating risks."
"The pace of global recovery has weakened and become more uncertain since their last meeting," said the communiqué. "Downside risks facing the global economy have increased."
Warning of negative spillover effects from a possible slowdown in the recovery of advanced economies, the ministers said: "The simultaneous and broad-based fiscal consolidation that is presently underway in many advanced economies poses considerable risks of a downward spiral in global demand."