Korea expected to get bigger say in IMF

By Kim Jae-kyoung

Staff Reporter

Beginning this year South Korea is expected to have a "bigger voice" in the International Monetary Fund (IMF) than Australia, after global leaders agreed to speed up reform on the IMF quota system at the G-20 summit in Toronto over the weekend. The final decision will be made by the next summit slated for November in Seoul.

Currently, working-level officials of G-20 countries are discussing details on how the 5 percent quota of advanced countries will be re-distributed to developing ones. The IMF quota refers to money that a country which is a member of the IMF has to donate to the fund so that it can lend money to other countries needing help. It also determines a nations' voting power.

According to the Ministry of Strategy and Finance and the IMF, Tuesday, Korea ranks 19th and has an IMF quota of 1.345 percent. The figure is considered very low, given the nation's economic size or GDP, which accounts for 2.176 percent of the total economic output by IMF member countries. Korea is still classified as an emerging economy.

If the IMF governance reform is completed in Seoul as scheduled, the nation's quota is expected to increase to 1.412 percent, which is higher than Australia's 1.36 percent.

In its Toronto summit statement, the G-20 said it has committed to a shift of at least 5 percent of voting power in favor of under-represented fund members, mostly developing and emerging countries that currently hold about 43 percent in voting shares

"South Korea is one of the most underrepresented fund members. The government has made efforts to increase the nation's voting right to the level that commensurates with its economic power," said a finance ministry official.

"Currently, G-20 member countries have agreed on the general framework for reform on the IMF quota system and they are in the middle of fine-tuning details. We expect them to be finalized at the Seoul summit," he added.

Voting rights reform has been a major item on the agenda at global economic and financial meetings over the past few years. Emerging economies have demanded the reallocation of quotas in the IMF and the World Bank.

At the Toronto summit, emerging economies, including China and Russia had called for a 7 percent shift. But, the prevailing compromise centered around a U.S. proposal for the 5 percent redistribution.

IMF Managing Director Dominique Strauss-Kahn said on Sunday that he hopes to reform the IMF's quota system by the next G-20 summit in South Korea.

In April, at The (World Bank's) Development Committee on Sunday, member countries endorsed the voice reform to increase the voting power of developing and transitional countries at the organization to 3.13 percent, bringing it to 47.19 percent. As a result Korea's voting right was raised to 1.57 percent from 0.99 percent in the World Bank.