Global Policy Forum

By Swaha Pattanaik

The European Union candidate to head the International Monetary Fund, Dominique Strauss-Kahn, on Thursday called for swift reform to give poor and fast-growing emerging countries a bigger say in the institution. At a time when developing countries are dissatisfied with the convention that sees the United States select the World Bank chief and Europe pick the head of the IMF, Strauss-Kahn sought to establish his credentials as an advocate of emerging states. "A new economic geography has arisen, with emerging economies becoming major actors in the world economy, a fact which has yet to be reflected in their voting power in the Fund," the former French finance minister said on his website. "The emerging and developing world does not feel sufficient ownership in the Fund. In order to reassert the legitimacy of the IMF, these countries must be granted a greater voice and more effective representation."

Strauss-Kahn's only rival to head the Washington-based institution once IMF Managing Director Rodrigo Rato steps down in October is former Czech central banker Josef Tosovsky, who is backed by Russia but not by the Czech Republic. Russia has said Strauss-Kahn does not have the necessary technical backing to do the job but the Frenchman looks to be the frontrunner given he has the support of the 27-member EU. Strauss-Kahn has in recent months toured the world to win over key developing countries, notably by laying out his vision of how the IMF should be reformed.

SWIFT REFORM

Rato started the work of reforming the Fund by seeking to strengthen the way it monitors the world economy and revamp its voting structures to reflect the rise of economic powers like China and India better. Strauss-Kahn said some progress had been made on the issue of quotas but added: "We should go much further and aim to agree swiftly on significant further increases for those countries whose dynamism and growing role in the world economy is not appropriately reflected in the quota distribution, while ensuring that all categories of countries are given sufficient voice." Even deeper reform was necessary, he said. "But quota reform may not be enough. I believe the dynamic of decision making has to be changed in order to decisively increase the input of developing and emerging economies," Strauss-Kahn said. He also said the IMF's job was to support poor countries in their efforts to become integrated into the world economy and that it should be ready to help them cope, if need be, with external financial shocks, such as recent global market turmoil. "It is very encouraging to see how emerging economies have withstood current episodes of market turbulences, thus reaping the benefits of past efforts to strengthen domestic financial systems and implement sound macroeconomic policies," he said. "Nevertheless, the Fund should stand ready to play its role and bring necessary assistance, if needed, to countries hit by external financial shocks."