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BRICS criticise paralysed IMF reforms
October 14, 2013, 7:40 am

The reform of voting rights, known as quotas, cannot proceed without approval from the U.S. Congress [Xinhua]

Emerging economies have pressed for greater say in the governance of the world lending body [Xinhua]

BRICS have expressed their disappointment at the failure of the International Monetary Fund (IMF) to usher in the critical reforms of the world lender, saying the delay would impact the IMF’s credibility, legitimacy and effectiveness.

The United States, the IMF’s biggest member, holds the only controlling share of IMF votes, and is yet to ratify the reforms of the 24 member body.

An earlier stipulated deadline was not met by the IMF as finance ministers in Washington gathered for the IMF’s annual meeting.

Alexandre Tombini, Brazil’s Central Bank Governor who attended the IMF meet said talks of reforms are now in “complete paralysis.”

The reform of voting rights, known as quotas, cannot proceed without approval from the US Congress.

“The main hurdles have been determined resistance to change on the part of overrepresented countries and somewhat flagging determination from IMF management to push the process forward,” Tombini said.

Indian Finance Minister P Chidambaram expressed frustration at the lack of clarity over the 2010 reforms meant to give developing economies a greater say in the governance of the IMF, asking “Why does this problem remain with us in meeting after meeting?”

“There is no clarity, even after the passage of a year, as to when this will be finally achieved,” said Chidambaram.

“Only a reformed World Bank and IMF will reflect correctly the expectations and aspirations of the world as it is today,” he said.

The Indian finance minister also asked why on-going IMF surveillance failed to foresee the market impact of exit from unconventional monetary policy.

“The IMF’s failure to identify certain risks and give clear warnings has demonstrated yet again the weakness of its Surveillance framework. It also questions the relevance and usefulness of the IMF exercise with regard to policy settings of member countries because repeated downward revisions could significantly influence market expectations besides spreading gloom,” he said.

The revised formula would give greater weight to purchasing power GDP which would have aided the emerging economies clout in the world body.

Meanwhile, the South African Finance Minister Pravin Gordhan was critical of the “sudden change in the narrative about emerging markets, which up until the second quarter of this year were praised for managing their economies very well,” said a ministry statement.

“[Emerging markets contributed] more than 50 per cent to global economic growth and for lifting large numbers of people above the poverty line,” added the statement.

Gordhan said doubts regarding the BRICS economies should be laid to rest.

“Three months later, we are apparently fragile and we are terrible managers of our economies. We the emerging markets are here to stay,” he said.

“We live in an interconnected world, and more importantly, we live in an interdependent world. There is no decoupling from you, the advanced economies, and there is no decoupling from us, the emerging markets,” warned Gordhan.

The BRICS Post with inputs from Agencies