scorecardresearch
Follow Us:
Friday, December 03, 2021

Experts call for review of IMF role, data integrity, completing quota reforms

Rakesh Mohan, former Deputy Governor of the Reserve Bank of India, said he analysed the issue of IMF quota reforms in a research paper last year. Each member’s quota determines its voting power as well as its borrowing capacity.

Written by Sunny Verma | New Delhi |
October 18, 2021 3:15:38 am
C Rangarajan, former Chairman of the Prime Minister’s Economic Advisory Council, argues that the IMF should focus on lower income countries and support other developing countries’ market funds raising activities, as its Article IV consultation reports are utilised by credit rating agencies, impacting the fund raising capacity of countries like India. (File)

In the backdrop of the 2021 annual meetings of the World Bank Group and the International Monetary Fund (IMF) currently being held in Washington, leading experts have suggested the need to review the role of IMF due to changing economic weight of emerging countries, stressing on completing quota reforms and maintaining data integrity amid the World Bank discontinuing its Ease of Doing Business reports.

“….it is important that the institutions do maintain their strictest vigilance and standards in repairing any damage to credibility, in ensuring that all such possibilities are eliminated to the extent possible,” N K Singh, president of the Institute of Economic Growth and Chairman of the 15th Finance Commission, said when asked about World Bank’s decision to discontinue EoDB report due to data irregularities. In particular, it was alleged that the EoDB rankings were tweaked to inflate the ranks for China (in EoDB 2018) and Saudi Arabia, UAE and Azerbaijan (EoDB 2020).

Singh stressed the need to complete quota reforms in the IMF amid changing dynamics of developed and emerging economies including India. A restructuring of the Article IV consultations, under which the IMF holds bilateral discussions with its members usually every year and its staff prepares a report, is also being sought. Article IV consultation is the most powerful instrument and it needs to be restructured and sharpened to make it more useful by using the new technologies and access to public data, Singh said.

Rakesh Mohan, former Deputy Governor of the Reserve Bank of India, said he analysed the issue of IMF quota reforms in a research paper last year. Each member’s quota determines its voting power as well as its borrowing capacity. Mohan argues that the US and China should jointly lead the efforts on transformation of relative quota shares in the IMF and associated reforms in the international monetary system.

“First, as China approaches or even surpasses the United States in its share of global GDP at market exchange rates its quota share would have to be of a magnitude similar to that of the United States. Second, the share of the European Union countries, including that of the UK, will have to reduce significantly…Third, the quota share of BRICS countries would have to increase significantly,” he wrote in the paper, ‘IMF Quota reforms and global economic governance: What does the future hold?’

C Rangarajan, former Chairman of the Prime Minister’s Economic Advisory Council, argues that the IMF should focus on lower income countries and support other developing countries’ market funds raising activities, as its Article IV consultation reports are utilised by credit rating agencies, impacting the fund raising capacity of countries like India. Most of the Asian countries including India can now raise funds on their own on the basis of strength of their forex reserves, and do not have to necessarily go to the IMF like in the past to tide of crisis, he said. “…therefore, they should now really focus on the much lower income groups and those who are not able to go to the market at all to raise funds and so, that is one thing that the IMF has to do.The second is that even though the countries like India and others are no longer clients, there will still be occasions when because of the sudden rise in the price of petroleum products or something, there may be a need and therefore, they need to look at the problems that may arise because of certain situations,” Rangarajan said.

During the 1991 crisis, India was able to utilise funding facilities of the IMF and able to tide over the difficult situation.

“The larger issue that has been talked about is how we see the management system in the IMF should be modified, that this forever informal arrangement, that the head of the IMF should be a European and the head of World Bank should be an American. The time has come reconsider this, and the IMF probably should really rethink on it,” he said.

Trend of EMs raising share in global GDP

With a continuing trend of emerging markets increasing their share in global output or GDP over the years, many experts have called for alignment of quotas and the accompanying lending windows of the IMF to reflect the changed economic positions of countries. A call is also being made to restructure country-specific consultations being done by multilateral institutions.

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Business News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
Advertisement
Advertisement
Advertisement
Advertisement