G-20 Ministers Agree ‘Historic’ Reforms in IMF Governance

Deal shifts representation at IMF toward emerging market, developing countries

European Executive Board members make room for more emerging market representation

Reform proposals still to be approved by IMF Board

Meeting in Gyeongju, Korea, G-20 finance ministers and central bank governors agreed on a doubling of IMF members’ quotas—financial stakes that determine voting power in the institution—that will shift voting shares toward dynamic emerging market and developing countries.

As a result of the quota rebalancing, the large, dynamic emerging market countries Brazil, China, India, and Russia move up to be among the top 10 shareholders of the IMF.

The ministers also agreed on a reshuffle of the IMF’s 24-member Executive Board that will raise the representation of dynamic emerging market and developing countries on the institution’s day-to-day decision-making body. There will be two fewer Board members from advanced European countries, and all Executive Directors will be elected rather than appointed as some are now. The size of the Board will remain at 24.

Discussion on legitimacy

IMF Managing Director Dominique Strauss-Kahn, speaking to reporters after attending the Gyeongju meeting, said the move was “historic” and the most important decision on the governance of the IMF since its creation in 1944. “There will be other reforms, but what we did today puts an end to a discussion on legitimacy that had lasted for years, almost decades."

The Gyeongju ministerial meeting was held to prepare the agenda for the full summit of G-20 heads of state and government in Seoul, Korea, on November 11. The agreement reached at Gyeongju still has to be approved by the IMF’s Board. The target date for completion of the changes to IMF governance is the IMF-World Bank Annual Meetings in October 2012.

The G-20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States, plus the European Union. To ensure global economic fora and institutions work together, the Managing Director of the International Monetary Fund and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis.

Together, member countries represent around 90 percent of global gross...