IMF sees 'break in the clouds', but no voice for emerging economies
Amid signs of a "break in the clouds" of the economic storm, world finance leaders have pledged to keep working collaboratively to restore international financial stability and revive growth.
But they appear to have made a slow move on the issue of giving emerging market countries a stronger voice in the International Monetary Fund, a demand reiterated by India at Saturday's meeting of the Fund's 24-member decision-making panel.
A communique of the International Monetary and Financial Committee (IMFC) said only that an upcoming review of members' voting power will "result in increases in the quota shares of dynamic economies, particularly in the share of emerging market and developing countries as a whole."
However the calls for greater representation for emerging economies like India, China and Brazil found powerful support from the United States with Treasury Secretary Timothy Geithner telling the IMFC the time had come for the Fund's governance to reflect the changing world.
"This is essential to strengthening the IMF's legitimacy, ensuring that it remains at the center of the international monetary system and reflects the realities of the 21st century," he said.
Reserve Bank of India Governor Duvvuri Subbarao said India "would like emerging economies to get a bigger share in the management of the IMF reflecting their growing strength in the economy."
But it isn't planning to use a promise of a loan to the IMF as leverage to gain a greater role within the institution. "I don't think we would link them in that sense," he told reporters after the meeting.
Subbarao said India would prefer to aid the IMF by purchasing bonds as part of an effort to triple the fund's resources to $750 billion. India could be willing to lend to the IMF through the fund's New Arrangements to Borrow, or NAB, too but not before getting answers to at least a few pressing questions.
"We are in principle committed to contributing but we cannot make a specific commitment before we have all the details," he said.
The IMFC endorsed a tripling of the IMF's lending resources to 750 billion dollars - a pledge made by leaders at a Group of 20 (G20) summit in London earlier this month.
It also suggested countries should begin thinking about reducing their massive deficits - the result of huge stimulus packages to revive growth - amid signs that the worst global recession in decades might be easing.
"We have serious problems. We are taking very serious measures, but things are beginning to look up," said Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMFC. "Carefully, cautiously, we can say there is a break in the clouds."
To ensure a recovery in 2010, the IMFC communique called for further action to restore the health of banks, revive lending and restart international capital flows.
It urged countries to keep up fiscal stimulus and develop plans to exit from the extraordinary measures taken once recovery is established.
IMF Managing Director Dominique Strauss-Kahn stuck to his forecast that the economic downturn will end in the first half of next year and suggested the time had come for developing an "exit strategy" from the crisis.
"From our point of view, the exit strategy has to be taken into account as soon as possible," he said at a press conference.