MANILA, Philippines - The Philippines together with emerging market economies (EMEs) reiterated their clamor for increased voting rights in multilateral lender International Monetary Fund (IMF) as they continue to fuel the strong recovery of the global economy from a major slump.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in an interview with reporters that EMEs, including the Philippines, renewed their call for a stronger voice in the IMF due to their contribution to the global economic recovery during the recent annual meeting of the IMF and the World Bank in Washington last week.
“Given the increasing economic role of emerging markets globally, their share in the quota of the IMF and their representation in the governance structure of the IMF need to be adjusted upward,” Tetangco said.
Quotas determine voting shares and access to IMF loans.
On April 2008, a large-scale quota and voice reform in the making for nearly two years was adop-ted by a large margin by the Board of Governors of the IMF. It aims to make quotas more responsive to economic realities by increasing the representation of fast-growing economies and at the same time giving low-income countries more say in the IMF’s decision making.
The reform builds on an initial step agreed by the IMF’s membership in September 2006 to have ad hoc quota increases for four countries – China, Korea, Mexico, and Turkey.
The reform package calls for a new quota formula; an ad-hoc quota increases to all 54 countries that were underrepresented under the new quota formula; tripling the number of basic votes to increase the voice of low-income countries, as well as protection of the share of the basic votes in total voting power going forward; providing resources for an additional alternate executive director for the two African chairs represented on the IMF’s executive board; and realigning quota and voting shares every five years.
“What needs to be done is really to go through the mechanics as well as the details of how this can be drawn up and implemented,” Tetangco said.
For the package of reforms to become effective, acceptance of the amendment on voice and participation by 112 member countries representing at least 85 percent of total voting power is required. As of mid-August 2010, 85 members representing about 78 percent of total voting power had accepted.
The IMF’s Board of Governors conducts general quota reviews at regular intervals of usually every five years.
He explained that the IMF uses a quota formula to guide the assessment of a member’s relative position.
The IMF said the newly agreed quota formula is a weighted average of gross domestic product with a weight of 50 percent, openness with 30 percent, economic variability with 15 percent, and international reserves with five percent. Quotas are denominated in Special Drawing Rights (SDRs).
The largest member of the IMF is the US with a quota of about $56 billion while the smallest member is Tuvalu with a quota of about $2.7 million. The Philippinas has a quota of about $1.019 billion.
“The main message that we got there is cooperation. We need sustained international cooperation and even greater international cooperation to deal with the need for rebalancing in the global economy,” the BSP chief added.
The quota largely determines a member’s voting power in IMF decisions. Each IMF member has 250 basic votes plus one additional vote for each SDR 100,000 of quota.
The International Monetary and Financial Committee (IMFC), which advises on IMF policies, called for a prompt start to the Fourteenth General Review of Quotas in April 2009 and in April 2010 the IMFC requested completion of the review before January 2011.
The Philippines has been considered a “prolonged user” of IMF resources, with 23 IMF-supported programs since 1962 but the country exited from the Fund for the first time in 40 years in 2006.
Upon exit, the IMF’s new role in the Philippines became somewhat limited but probably more relevant to the emerging stage in the country’s development.