More powers for emerging economies

LONDON: In a significant victory for India and other major emerging economies, the world’s leading powers on Saturday strongly agreed with their long-standing demand to be given increased representation and voting rights in the International Monetary Fund and the World Bank to reflect their new global status.

This was one of the key issues on which an agreement was reached at a meeting of finance ministers of G20 countries here, ahead of a summit of G20 leaders in Pittsburgh, U.S., later this month.

The meeting also agreed to continue measures to boost the global economy despite signs of recovery, and to impose a tougher regime on the banking industry to prevent another crash, though behind-the-scenes differences between Britain and other European countries, particularly France and Germany, persisted.

Speaking to reporters after the meeting, UK Chancellor Alistair Darling said it was agreed that the powers of leading developing countries within IMF and the World Bank should be “significantly” increased as part of long-pending reforms of international financial institutions.

“We hope considerable progress [will be made] by the time we reach Pittsburgh,” Mr. Darling said.

The view was echoed by the U.S. Treasury Secretary Timothy Geithner, who also said that America was working with India to break the deadlock on the Doha round of talks and hoped that “progress would be made.”

On Friday, the finance ministers of India, China, Russia and Brazil (the so-called BRIC countries) called for priority to be given to restructuring IMF and World Bank to reflect what Pranab Mukherjee described as “ground realities” of the new emerging world order. They demanded a “substantial shift of quotas and shares in favour of emerging market and developing countries,” pointing out that the current regime was not only “unfair” but also undermined the “legitimacy” of these institutions.

Public spending

Another key issue on which the BRIC countries’ position was reflected in the final communiqué related to a commitment to continued public spending until the global economy recovered fully. France and Germany had wanted the G20 to start discussing “exit strategies” to scale back spending on fiscal stimulus, arguing that the worst of the recession was over.

But the majority view at the meeting was against premature winding of financial support. Instead, it was agreed that while “exit strategies” could be discussed, the “scale and time-frame” would vary from country to country.

The meeting also shared the BRIC countries’ concern over protectionism and declared that G20 was opposed to “all forms of protectionism.”