The International Monetary Fund [IMF]s goal is to regulate the flow of capital.

It
has many responsibilities, and among them, there are three major roles: surveillance of
impending economic hardships; technical advice to governments in crisis; and lending money
directly. Since its creation at 1944, the IMF has grown significantly, as of now compasses
over 188 countries. Throughout its existence, the IMF has received consistent criticism due to
its lopsided structure and often ineffective policy. Economist Jeffrey Sachs even stated that
the IMF was the detonator of the 1997 Indonesian crisis (n.d.). If IMF is to be effective,
reforms in terms of conditionality of loans and voting procedures are needed. The IMF will
not be able to apply actual change in structure because the current system makes it very
difficult for the IMF to act without American congress ratifying. European nations hold a
considerable share of voting power, relatively overrepresented in comparison to developing
nations.
The IMFs daily administration is the responsibility of the Executive Board. Eight
Countries United States, Japan, Germany, United Kingdom, Saudi Arabia, China, and
Russia appoints a director, and the remaining 180 countries elects the remaining 16
directors. The directors delegate their respective countries or groups. This executive board
oversees daily operations, while the full board of governors meets annually to decide on
bigger issues like admission of a new country. The votes are weighted in accordance to the
quota each country fills in the Special Drawing Rights [SDR] pool. In the current state of
affairs, United States holds 16.37 percent of voting power, about ten percent higher than
second place Japan. Since most important decisions require eighty five percent majorities,
The United States effectively has veto on all matters.
The current system has been consistently criticized by developing nations because of
its lopsided representation of western countries. UNDP reports in 2007 showed that the ratio

of representation to population in GROUP REPRESENTED BY SOUTH AFRICA was not

even half that of Europe. But with developing nations rapidly taking bigger shares in the
world economy, they have not been given the adequate increase in the IMF to reflect it.
Indian Prime Minister Narenda Modi, disappointed with the inability of IMF to implement
reforms on voting power, expressed she was deeply disappointed after the G20 Summit of
2015 (Roy, 2015). The disappointment did not end there for the emerging economies.
In 2014, through the BRICS summit, a bank for development was established. The
BRICS bank, named the New Development Bank BRICS [NDB BRICS], would serve as
alternatives for the IMF and the World Bank (NDBBRICS.ORG CITE). The founders being
BRICS and membership open to all UN nations, the bank opened in July 2015. The voting
was not weighted according to a quota like that of IMF, and no country had veto power. The
NDB is one big sign of attempts to replace the IMF. If the IMF is not to fall behind in the
changing world order, it must go through reforms.
In fact, there have been efforts to go through reforms within the IMF. In 2007,
reforms were carried out under managing director Rodrigo Rato. The 2006 Singapore
meetings lead to agreements that led to an initial increase of quotas for four underrepresented
economies, and a new system to recalculate shares in the IMF. However, this reform was
miniscule in effect, with Europe still overrepresented and United States retaining their veto
privileges.

http://ndbbrics.org/
http://indianexpress.com/article/india/india-news-india/g20-endorses-indias-concerns-over-delays-inimplementation-of-imf-reforms/

Jeffrey Sachs. (n.d.). BrainyQuote.com. Retrieved December 2, 2015, from BrainyQuote.com

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