The G20 communique on Monday backed India on the issue of quota reforms of the International Monetary Fund and called for early reforms, and expressed disappointment with the delay.
“We remain deeply disappointed with the continued delay in implementing the IMF quota and governance reforms agreed in 2010. The 2010 reforms remain our highest priority for the IMF and we urge the United States to ratify these reforms as soon as possible,” the G20 communique issued at the end of the two-day summit, said.
Prime Minister Narendra Modi had expressed hope, earlier in the day, that the US would ratify the quota reforms of the International Monitoring Fund, a key demand of the developing countries.
Modi on Monday told the G20 leaders at the working session on resilience, “IMF should remain a quota based institution and not depend on borrowed resources. I hope that the ratification of the reforms of 2010 in the United States would be completed at the earliest.”
Mindful of the aims of the 2010 reforms, the G20 communique said, “We ask the IMF to complete its work on an interim solution that will meaningfully converge quota shares as soon as and to the extent possible to the levels agreed under the 14th General Review of Quotas. The 14th Review should be used as a basis for work on the 15th Review, including a new quota formula. We reaffirm our commitment to maintaining a strong, quota-based and adequately resourced IMF. We reaffirm our agreement that the heads and senior leadership of all international financial institutions should be appointed through an open, transparent and merit-based process and we reiterate the importance of enhancing staff diversity in these organisations. We reaffirm that the Special Drawing Rights (SDR) basket composition should continue to reflect the role of currencies in the global trading and financial system and look forward to the completion of the review of the method of valuation of the SDR.”
IMF reviews members’ quotas once in five years and the last such review took place in December, 2010. India has agreed to its quota increase under the review.
Once the review takes effect, India’s share will increase from the current 2.44 per cent to 2.75 per cent, following which the country will become the eighth largest quota holder at the IMF, up from the 11th position.
Emerging economies, like India, China, Brazil and Russia have been asking for increased voting rights in IMF, which would reflect their growing share in world economy. The IMF quota reforms are aimed at giving more voice and voting power to the emerging economies with regard to the functioning of the multilateral body.
Appreciating the G20 for its successful efforts to build a more resilient and open global financial system, he said, “It is an essential foundation of growth and stability in the global economy.”
In India, he said that the government and the Central Bank, are taking steps to further strengthen the financial and banking sector.
“We should bear in mind that higher capital requirements should not become a constraint on promoting financial inclusion or functioning of the banking sector in developing countries,” he said, adding that effective supervision and better use of technology can reduce capital requirements.