BEIJING — Kristalina Georgieva, the head of the International Monetary Fund, has expressed support for reforms that would potentially grant Beijing more voting power within the organization.
What Happened: The IMF head, in an interview with the Financial Times, has emphasized the necessity for the organization to adapt to changes in the global economy over the past decade, including China’s significant economic rise.
Georgieva called for the institution to address the disparity between China’s 6% share of voting power in the IMF and its substantial influence in the world economy.
“There is a need to constantly change to reflect how the world economy is changing,” said Kristalina Georgieva.
Voting Imbalance? Currently, China’s IMF quota is smaller than Japan’s, despite its larger share of global GDP. The U.S. holds the largest share at around 17%, giving it veto power over quota decisions.
While changes to voting weights are not currently under review, Georgieva’s call for a long-term reconsideration of IMF representation coincides with U.S. efforts to bolster multilateral institutions based in Washington, aiming to increase Western influence with emerging and developing countries, according to FT.
The China Dilemma: However, the question of reallocating shares, especially to increase Beijing’s voting rights, remains a sensitive issue. While the U.S. has left the door open to such reallocations in the future, it has reportedly signaled its intention to veto any immediate expansion of China’s voting rights.
Western creditors have accused China, the world’s largest bilateral lender, of hindering efforts to provide debt relief to struggling countries, according to FT.
Why It Matters: The urgency for reforms comes as Georgieva seeks to expand the institution’s resources to address global economic challenges.
IMF plays a pivotal role as the “global financial safety net,” said Georgieva. She further warned of “potential devastation” if the institution lacked the necessary resources to instill confidence in the global economy.
In July, the IMF revised its global growth forecast, anticipating a slowdown from last year’s 3.5% to 3% for this year and the next. The report highlighted that this slowdown is primarily concentrated in advanced economies. It also noted concerns about global economic activity losing momentum due to the tightening of monetary policy and persistent core inflation above central banks’ targets.
© 2023 Zenger News.com. Zenger News does not provide investment advice. All rights reserved.
Produced in association with Benzinga
Edited by ISAAC OKOTH NYAMUNGU and Newsdesk Manager