The former World Bank president Robert Zoellick had remarked, ’Change is the great constant of the world economy’.
Since 1945-46, when the Bretton Woods twins (IMF and World Bank) were formed, the world economy has come a long way. Developing economies like India and China have become the highest contributors to the global growth. Though India’s growth has slowed in the past couple of years, it has been projected that, by 2015 India’s growth will return to its high growth trajectory.
But the power dynamics in the institutions such as IMF has not kept pace with the changing economic realities of the world. In 2011, BRICS had issued a statement which demanded increased representation of the developing countries in IMF and World Bank. They also expressed disapproval over the fact that the IMF’s Managing Director was always a European and the World Bank president from the United States.
IMF funds itself through a quota system in which countries contribute to the pool as per the quotas assigned to them and it lends to other countries from this pool. These quotas determine the voting share of individual countries. The formula for calculating quotas was most recently reformed in 2010. But, these reforms resulted in only 6% of quota shift from developed countries to dynamic emerging markets and developing economies. India despite being the fourth largest economy in the world, second highest contributor to the global growth and also second highest contributor to global net demand during the recession, ranks only 8th in its IMF quota share.
In World Bank and IMF, the US and Europe justify their dominance by the argument that they are the richest countries. And also creditors, and not debtors, should control these lending organisations as is done in the private banks. But this argument is flawed on the grounds that IMF and World Bank are social institutions and they do have profit-making as their objectives.
All the members should have a proportionate share in decision-making in these institutions reflecting their economic dominance. Otherwise its status as a true international organisation will become farce.
