Brazil and other significant developing nations have long called for a significant redistribution of IMF quotas to address the underrepresentation of large emerging-market economies, but Tatiana Rosito, the secretary for international affairs at the Brazilian Finance Ministry, claims that the cost of inaction is rising.
While changes delay, the developing world hasn’t stood still, she told Bloomberg News in an interview. “The BRICS and the Asian Infrastructure Investment Bank’s creation of the New Development Bank demonstrates that emerging nations are looking for ways to finance their own development.”
Just as he demanded changes at the UN Security Council last month, President Luiz Inacio Lula da Silva will utilise the influence of his Group of 20 leadership to push harder for reforms at the IMF and the World Bank. Fernando Haddad, the finance minister, would be responsible for delivering the message to the multilateral lenders in Marrakesh the next week.
In an interview with the Financial Times, IMF Managing Director Kristalina Georgieva stated that the Washington-based lender must adapt to reflect how the global economy is developing. She sounded the alarm about potential destruction if the institution fails to inspire confidence in other nations.
IMF quotas are now held by the US in the biggest proportion, at roughly 17%. Only 6% of the second-largest economy in the world is in China. Brazil only has a little over 2%.
It is doubtful that voting shares will alter throughout the fund’s current quota review term, which expires in December. According to Jay Shambaugh, the US Treasury’s undersecretary for international affairs, the US opposes giving countries more voting power unless they are “respecting the roles and norms of the IMF and working to strengthen the international monetary system,” an apparent allusion to China.
“Brazil’s position is that an increase in quotas must be accompanied by a realignment in favour of emerging countries, to correct their underrepresentation,” Rosito stated. “
We concur with the US that it is critical to raise quotas in order to replace the current bilateral agreements.
She continued by saying that Lula wants to strengthen multilateral development banks so they may finance projects that combat economic and social inequalities as well as the environment. That involves enabling those institutions to leverage their current capital in order to enhance their lending capacity, which also needs the support of rating agencies.
Lula advocated for improvements to global governance on numerous occasions at international gatherings like the G-20 conference in New Delhi and the UN General Assembly in New York. He has also emphasised how challenging those reforms have been.
When he assumed the G-20 leadership in India, he told reporters, “We have tried to make modifications to the IMF since our first meeting, but adjustments have been extremely minor and do not advance.