WASHINGTON (Reuters) - The International Monetary Fund failed to meet a self-imposed Thursday deadline for agreeing on a new formula to determine member countries' voting power that would give emerging economies greater say in the global financial institution.
IMF member countries have wrangled for two years over specifics of the formula, intended to reflect the economic rise of China, Brazil and other large emerging market nations.
The IMF said it planned to finalize a formula by January 2014 when it next reviews the voting shares of member countries, which determines how much each country can borrow and its overall influence in policy matters.
An IMF statement on Thursday said there had been "important progress in identifying key elements that could form the basis for a final agreement on a new quota formula."
"The membership is now in a good position to agree on an improved quota formula in the context of the upcoming 15th general review of quotas," IMF Managing Director Christine Lagarde said.
Emerging economies blamed Europe for resisting change that would weaken its traditional domination in the fund.
Paulo Nogueira Batista, executive director for Brazil and 10 other countries, decried the lack of a deal after months of negotiations and warned that the IMF would lose credibility unless it changed.
He said governance reforms had practically ground to a halt since 2011 when the fund failed to enforce a historical deal sealed in 2010, that would make China the third-largest voting members and revamp the IMF board to reduce Europe's dominance.
"Now we have an attempt to paper over the fact the review of the quota formula has not been completed either," Nogueira Batista said in a statement. "The IMF is approaching what we could call a 'credibility cliff'".
Chinese Foreign Ministry spokesman Hong Lei said it was important that previous quota agreements are implemented.
"We hope that the relevant organization can conscientiously put into effect the existing consensus' and agreements and implement them," Hong told a daily briefing in Beijing.
The Obama administration has yet to indicate when it plans to submit the 2010 quota reform package to Congress for approval. "We are very close to the finishing line and we are urging all our members to complete the necessary approvals as quickly as possible," IMF spokesman Gerry Rice told reporters, declining to elaborate on U.S. plans.
IMF member countries have squabbled for months over specifics of the formula, with emerging market economies pushing for changes that would give more weight to purchasing power GDP - which measures the buying power of an economy instead of just the dollar value.
European countries have sought more emphasis on openness, the most hotly debated of all the measurements, because it captures among many things the vast trade flows between euro zone countries. Removing, or scaling back, the openness measure would sharply reduce Europe's influence in the IMF and shift power to China, India and Brazil.
Member countries set a January 2013 target for a reconfigured formula but many expected the deadline would be missed because of a continued inability to narrow differences.
"A new quota formula remains key to the indispensable rebalancing of decision-making power in the IMF," Nogueira Batista said. "Without this rebalancing the institution will not be able to retain its centrality in the world economy in the years to come."
Under the current formula, he said the Netherlands' quota share was close to that of Brazil, which is a much larger economy. Meanwhile, the quota share of tiny Luxemburg is larger than Argentina or South Africa and three times bigger than Morocco, he argued.
A senior IMF official insisted that progress had been made in narrowing differences among countries, including on the contentious issue of openness where there was agreement that it should remain in the formula.
"It was agreed that openness should continue to play an important role in the formula, and concerns regarding this variable need to be thoroughly examined and addressed," the IMF said in a report published on Thursday.
The official, who agreed to speak on condition of anonymity, said countries supported removing a measure from the formula that tries to capture members' potential need for IMF resources.
"The work we have done has identified some problems with this variable and it has not proved to be a very good indicator or predictor of members' potential need for resources," the official added.
Countries favored keeping the indicator that measures a country's foreign exchange reserves and says a lot about members' financial strength and ability to contribute money to the IMF.
The official expressed confidence of an agreement on a new formula. "We haven't had many revisions of the formula in the fund's history - I think there has been three with gaps of 20 to 30 years in-between - so in many ways what we're doing is much more ambitious than we've done in the past," the official added.
(Editing by Eric Meijer and M.D. Golan)
Trending On Reuters
Rahul Gandhi led a large farmers rally on Sunday that focused rural anger toward Prime Minister Narendra Modi's policies, in the first public appearance in months for the elusive scion of the country's most famous political family. Full Article