G-20 summit may offer ‘grand IMF bargain’ to India, ChinaFebruary 17th, 2009 - 6:14 pm ICT by IANS
London, Feb 17 (IANS) Emerging economic powerhouses China and India may be encouraged to strike a “grand bargain” at a coming London summit in which they will take on a greater role in the international financial system in exchange for keeping down protectionist barriers.
The deal could be struck at the April 2 summit of the Group of 20 (G-20) countries in London - to be attended by US President Barack Obama - and forms part of British Prime Minister Gordon Brown’s efforts to seek sweeping reforms of the International Monetary Fund (IMF)
Brown is meeting European leaders and heads of the IMF and the World Bank this week in order to press for major reforms in the backdrop of the current global economic downturn that has developed into a recession, particularly in developed countries, including Britain.
The diplomatic drive is aimed at showcasing the G-20 summit as “a turning point in remaking the international economic order,” primarily through the reform of the IMF’s governance, funding and surveillance powers, Gordon Brown’s office said.
Brown, in alliance with the Australian prime minister Kevin Rudd, wants to increase the funding of the IMF, speed up a review to give China and India “clearer voting rights”, and give the fund powers to direct governments to respond to its surveillance reports, according to The Guardian Tuesday.
Brown also wants the G-20 to have a permanent secretariat, a move that would make it a powerful body overseeing finance and largely eclipse the Group of Eight (G-8), which is composed of the world’s eight most industrialised countries.
Brown told a seminar on the G-20 summit last week: “If people feel that the IMF is simply the representative of the richest countries with very little say for the poorer countries, if people think that the World Bank is similarly constructed, then people are going to either seek to have other institutions or going to reject the existing institutions, and of course the danger of that at this time is protectionism.”
The Guardian said Brown’s aim is to develop a “grand bargain” in which there is a greater role for emerging economies such as China in the IMF, and easier access to its financial assistance, “in exchange for such countries playing by the global rules and not trying to build up surpluses and reserves as an insurance policy.”
India too has long argued the need for IMF reform, with its Planning Commission Deputy Chairman Montek Singh Ahluwalia telling the World Economic Forum in Davos in January that the IMF in its present shape was “not capable” of dealing with the global meltdown.
Noting that developing countries had seen an outflow of $300 billion of foreign exchange reserves following the financial meltdown, Ahluwalia said: “The global community should put in place an institutional mechanism that will restore this flow.”
“Let us restructure these institutions. We have got a huge crisis, and the way institutions function needs to be rethought. What we are doing is… putting bandages and all kinds of bits and pieces,” Ahluwalia added.
Finance Secretary Ashok Chawla, who attended a G-20 preparatory meeting in London last month, told IANS that India was keen to see greater capital flows through international financial institutions such as the IMF to help bridge current shortfalls.
Meanwhile, Brown is to meet IMF Managing-Director Dominique Strauss-Kahn and World Bank President Robert Zoellick in London Wednesday, before travelling to Rome Thursday for talks with Italian Prime Minister Silvio Berlusconi, the current chair of the G7 Group of countries (G-8 minus Russia).
Brown flies to Berlin Sunday for a meeting of European members of the G-20 chaired by German Chancellor Angela Merkel, where leaders will discuss a joint European strategy for the G-20 summit.