India has opened debate for the next big reform in the administration of global economy. institutions. The country’s representative Shaktikant Das has demanded that the next Managing Director of the IMF should be from emerging economies.
The demand for an emerging market head for the world’s top financial institution came after the whole 187 members ratified a second term for France’s Christina Legarde who was the MD of the Fund for the last five years.
“This time, there was no candidate from any other country. It was proposed by all European countries. India supported her candidature. But while doing so we have indicated, we have informed the Fund that in the next round the managing director (MD) position should go to an individual from an emerging economy,” said Union Finance Secretary Shaktikant Das.
The IMF had eleven Managing Directors in its seven-decade history – all of them were Europeans. The arrangement of European heads is a tacit understanding between the US and Europe as the former enjoys a built in veto power at the IMF. In return for the US veto power, Europe nominates the Funds’ MD.
For any important decision to get ratified, at least 85% vote is needed and the US has 16.67% votes. Major decision like quota revision, SDR currency basket determination all need ratification from the US Congress.
After the financial crisis of 2007, the clout thirsty emerging markets are demanding more representation for them in the governance of international institutions like the IMF and the World Bank. India is at the forefront of the campaign though China is the major beneficiary of governance reforms. It has got its currency in the SDR basket and its vote share has almost doubled to 6.4 % after the latest quota revision.
IMF’s Managing Director is elected by its Board of Executives that has 24 members from the whole 187 countries. A majority vote is necessary for the election though in most occasions there is no election but consensus based selection. Board of executive members from the US and Europe have nearly 50% vote. This means that their stance is vital in the election of the MD.