US Senate ratified IMF reforms in budget bill to boost representation of emerging economies

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Who: IMF reforms
What: Ratified by US Senate in budget bill
When: 19 December 2015
Why: To boost representation of emerging economies

The Senate of United States (US) on 19 December 2015 ratified reforms to boost the representation of emerging economies at the International Monetary Fund (IMF) as part of Budget Bill. The legislation will now go to President Barack Obama.

If adopted, it will allow emerging economies and industrial powerhouses like India and China to have a greater say in how the IMF is managed.

Changes under the Reforms
• China’s voting rights will rise to 6 percent from 3.8 percent and the nation will become the third-largest shareholder, from its previous sixth position.
• It would also double the IMF resources to about 660 billion dollars.
• As China’s voting rights rise, the US will see its share drop from 16.7 percent to 16.5 percent.
• Under the new proposals, the IMF board will be entirely elected.
• India’s voting rights will also rise to 2.6 percent from the current 2.3 percent.
• The biggest losers are European economies which will see their voting rights diminished.
• The US retains its veto power.

This is the biggest shake up since the IMF and the World Bank (WB) were set up to manage the post-World War Two economy.

The decision to bring in reforms to give a greater say to emerging economies follows IMFs decision to include China’s currency, the renminbi, as a reserve currency alongside the US dollar, the euro, the yen and British Pound.

The IMF reforms were agreed by its 188 members in the aftermath of the world financial crisis in 2010.