Africa Calls on Brown to Block IMF Reforms

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Plan Favours China, South Korea, Turkey and Mexico

Chancellor Said to be Concerned Over Changes

By Larry Elliott

Guardian
August 31, 2006

Gordon Brown was last night at the centre of a row over the future of the International Monetary Fund as it emerged that Africa was seeking to block reforms giving four leading developing countries a bigger say in the running of the Washington-based organisation. African countries reacted furiously to proposals that would give priority to China, Mexico, South Korea and Turkey at next month's annual meeting of the IMF while delaying action to give the world's poorest countries greater influence over the body that often dictates their economic policies.


In a letter opposing the reform package, Africa's representatives on the IMF's governing board said the blueprint drawn up by the Fund's managing director, Rodrigo de Rato, would leave them in an even weaker position. They called on Britain and other developed countries to vote the proposal down.

Mr Brown plays a pivotal role at the IMF as chair of its decision-making body, the International Finance and Monetary Committee, and has publicly backed calls for a greater voice for African countries at the Fund. Sources close to Mr Brown said last night that he shared the concerns of Africa about the timing of the changes at the IMF and that he would be seeking to broker a compromise in the two weeks before the Fund holds its annual meeting in Singapore.

"Britain supports reform of the IMF, but the chancellor's commitment to a stronger voice for Africa is very clear," one source said. "We share their concerns." Mr Brown is in Norway today calling for a substantial increase in the UN's emergency assistance programme so it can respond more quickly and effectively to humanitarian crises such as the one in Lebanon. But he was last night considering how best to resolve the IMF dispute.

Mr de Rato requires backing from 85% of the IMF for his two-stage reform programme, which could be blocked if Britain and another developed country sided with the Africans. In the first phase, China, Mexico, South Korea and Turkey would receive recognition of their growing role in the global economy by seeing a small increase in their shareholding at the IMF of just under 2%. This would increase their collective voting strength. In the second phase, there would be a change to the formula by which shareholdings are allocated, providing a further shift in voting power towards the fast-growing countries of Asia. This would be accompanied by a proposal to give a greater voice to poor countries.

African countries said there was no guarantee that the proposal to give them more influence would be agreed by the IMF's members. They said the package lacked "the necessary firm commitment to protect the interest of low-income countries, including those in Africa".

A spokesman for Mr de Rato said the Fund was fully committed to both parts of the package. He added that the proposals to help the least developed countries would take time because they required changes to the IMF's articles of association, but that ad hoc increases to the quotas for China, Mexico, Turkey and South Korea could be agreed at once. "Just because something can be done at the beginning of the process doesn't mean it is more important than something that takes time," he said. "The alternative is to do nothing until everything can be achieved."

The Fund wants its voting structure to better reflect the make-up of the new global economy rather than the world as it was when the IMF was set up at the end of the second world war. But it accepts the need "to enhance the participation and voice for low-income countries, whose weight in the global economy may be small, but for which the Fund plays an important advisory and financing role".

Jeff Powell, coordinator of the Bretton Woods Project, a thinktank that specialises in the Fund and the World Bank, said foot-dragging by member states could mean that it would take years for Africa to increase its voice, and that Britain's influence would be critical. "We understand that the African executive directors are looking for the support of the UK, which has been vocal about the need for any resolution not to diminish the power of the small countries."


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