IMF reform, World Bank graft plan both approved

Written by:
Subscribe to Oneindia News

Singapore, Sep 18: The International Monetary Fund overwhelmingly approved a plan today to boost the voting shares of China and three other emerging economic giants to better reflect their clout in the world economy.

The blueprint, will be followed by a second stage of broader reforms by 2008 to make the fund's governance more representative of its 184-strong membership.

The plan, which IMF Managing Director Rodrigo Rato says will usher in the biggest shake-up in the fund in a generation, had drawn fire from some countries that fear losing power and others upset they will not gain enough influence.

But German Finance Minister Peer Steinbrueck told reporters the plan had won 90.6 per cent approval. The proposal needed 85 per cent support to go ahead.

''I think it is an important and a very good result that 90.6 per cent of the IMF members have approved the ad hoc quota increase for China, South Korea, Mexico and Turkey,'' he said.

''Otherwise, it would have cast a shadow over the IMF meeting.'' The overhaul aims to correct the under-representation of countries such as China, which has fewer votes than Belgium or the Netherlands even though its economy, the world's fourth-largest, is twice their combined size.

But the plan has exposed deep divisions in an agency searching for a new role in a world where fewer countries are turning to it for emergency loans and big countries are all too often ignoring its policy advice.

India, Argentina, Egypt and Brazil said the plan did not give enough power. Others objected that they would lose influence.

Anti corruption fight

As the votes on the reform plan were being tallied, finance ministers backed a controversial new World Bank strategy for tackling corruption and warned against a borrowing binge by poor countries that could plunge them into a new debt crisis.

After lengthy haggling behind the scenes, ministers authorised World Bank President Paul Wolfowitz to press ahead with a campaign against graft that he has put at the heart of the Washington-based lender's activities.

But, in a reflection of concern among some countries that Wolfowitz is being overzealous, ministers said their representatives on the bank's board would oversee implementation of the strategy and asked for a progress report next April.

Britain, France and Germany in particular have voiced concern that the crusade against corruption is slowing the flow of loans and punishing the poor. Critics have also complained at what they see as the arbitrary way in which the bank suspended loans to countries including Kenya, Bangladesh, India and Cameroon.

Hilary Benn, Britain's development secretary, told reporters he was very pleased with the outcome. ''It's clear that the board oversees its development,'' he said of the strategy.

The issue of corruption has been a lightning rod for broader dissatisfaction with Wolfowitz, who pledged to cooperate with his board to implement a plan that he called a major step forward.

''We want to work to develop transparent, predictable, objective standards so people know what to expect. We want to get the proportions right,'' he told a news conference.

He made no apologies for fighting corruption.

''It is of fundamental importance. It is about making certain that money goes to schools and textbooks for children, medicines for mothers and creating job opportunities for the poor -- not to line the pockets of the rich and powerful,'' he said.

DON'T BORROW TOO MUCH Ministers also warned poor countries that have had their debts written off not to borrow so much new money that they fall back into a debt trap.

Ministers worry that a flood of lending by a new breed of creditor governments, particularly China, will undo the benefit of writing off tens of billions of dollars owed to rich-country governments and multilateral development institutions.

Rich countries want that the debtors have saved to pay for more schools and hospitals and not to service new loans.

''We cautioned against excessive borrowing after the relief, which may lead to the re-emergence of debt distress,'' the Development Committee of the World Bank and International Monetary Fund said in a communique.

US Treasury Secretary Henry Paulson said there was already anecdotal evidence of large loans going to countries that have only recently received debt relief.

''We need effective incentives or penalties to deter irresponsible borrowing or lending,'' Paulson said. ''This is an urgent task that requires our joint attention.''


Please Wait while comments are loading...