Brics seek greater power in IMF in return for extra funds

LEADERS OF the world’s most powerful emerging economies have threatened to withhold additional financing requested by the International Monetary Fund to fight the European sovereign debt crisis unless they gain greater voting power at the fund.

Meeting in India yesterday, the heads of state from Brazil, Russia, India, China and South Africa expressed their frustration at the slow pace of reform at the Washington-based multilateral lender, historically dominated by Europe and the US.

In a joint statement, the so- called Brics nations said that there was an urgent need to “better reflect economic weights” and to “enhance the voice and representation of emerging market and developing countries” at the IMF.

“We stress that the ongoing effort to increase the lending capacity of the IMF will only be successful if there is confidence that the entire membership of the institution is truly committed to implement the 2010 reform faithfully,” they said.

The IMF’s shareholders agreed in 2010 to shift more of the fund’s voting weight towards emerging market nations, but the US has not passed enabling legislation.

The Brics leaders also criticised western countries for their poor handling of the global economy since the financial crisis.

Dilma Rousseff, Brazil’s president, accused western countries of causing a “monetary tsunami” by adopting aggressive expansionist policies such as low interest rates, which are making emerging economies less competitive globally.

“This crisis started in the developed world,” Ms Rousseff said. “It will not be overcome simply through measures of austerity, fiscal consolidations and depreciation of [labour costs], let alone through quantitative easing policies that have triggered what can only be described as a monetary tsunami, have led to a currency war and have introduced new and perverse forms of protectionism in the world.”

Despite uniting over reform of the IMF, the Brics failed to coalesce around one of the two non-US candidates seeking the presidency of its sister organisation, the World Bank.

Ngozi Okonjo-Iweala, the Nigerian finance minister, and José Antonio Ocampo, the former Colombian finance minister, are both vying for the job, which traditionally goes to an American.

Barack Obama, US president, has nominated Jim Yong Kim, president of Dartmouth College and a former head of the HIV/Aids programme at the World Health Organisation. Mr Ocampo said Mr Kim lacked appropriate experience. – (Copyright The Financial Times Limited 2012)