As you know, about the only good thing that came out of the G20 summit was the decision to provide additional funding for the IMF, and to extend more influence to members from the developing world, namely China, India, Russia and Brazil.
Reform of the IMF is actually one of the most important issues today, but it has hit a hurdle.
Representatives from the big four BRIC countries met up yesterday.
The Brazilian Finance Minister described the announcement of the IMF extra funding as “premature”.
Alexei Kudrin, Russia’s Finance Minister, is worried that the developing world say one thing, but mean something else.
“We already meet a cool attitude and even resistance among the developed countries,” he said. “The leading countries are not in a hurry.”
The IMF made itself few friends ten years ago after the Asia, and then the Russian crises.
It seemed that the main purpose of loans it provided was to ensure debtor countries could repay debts to the West. The economic consequences in these countries were, as a result, horrendous.
China watched the developments of that period with alarm. This is perhaps the single biggest reason why China has been so determined to grow without borrowing from the West. This in turn has helped create global imbalances – the true cause of the economic crisis.
Traditionally the boss at the IMF is European, and the World Bank’s top person is American. It is clear that this has to change.
But the old consensus is rather cosy. There are plenty of vested interests opposed to change. The US is against ceding power to the likes of China and Russia.
And yet, reform of the IMF is essential for promoting stability moving forward.
© Investment & Business News 2013