Today, Australian Prime Minister Kevin Rudd pressed for a greater role of China in International Monetary Fund (IMF) as a prelude to the G20 meeting on April 2. With this, the first step in reforming this multilateral institution has been taken. That step is to give a greater voice to borrower countries that are poorer than the wealthy nations that lend to the bank.
On its part, China is ready to take the reins. According to a Reuters report filed today, the country’s vice foreign minister He Yafei “told reporters that Beijing would press for reform of international financial institutions with a view to giving a bigger voice for developing countries.”
A November 2006 paper by Brock Blomberg of Claremont McKenna College and J. Lawrence Broz of University of California, San Diego, explores this conflict. Titled, The Political Economy of IMF Voting Power, this short paper is insightful as much as it is mathematical.
“The IMF’s membership is now divided into two blocs: rich country “creditors” that provide the lion’s share of IMF resources, and poor country “borrowers” that draw upon the Fund for financial assistance and are subject to its policy conditionality,” the paper says. “This division creates tensions around governance issues and voting power because rich country creditors have different interests regarding the terms and conditions of IMF lending, and are sceptical about ceding greater control to developing country borrowers. To oversimplify, developing countries favour quota increases and less conditionality since they are more dependent on the IMF for payments financing and more vulnerable to financial crises. Industrial countries resist quota increases and favour increased conditionality and surveillance since they have access to private credit markets to finance deficits and do not rely on the IMF for support (as it was the case in the 1960s and 1970s).”
Blog post on Cutting the Edge
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment