INDIA SUPPORTS THE ALLOCATION OF IMF FUNDING BASED ON QUOTAS

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Finance Minister Nirmala Sitharaman emphasized the need for a robust, quota-based International Monetary Fund (IMF) that is adequately funded and plays a central role in the global financial safety net and climate action, while adhering to the principles of common but differentiated responsibilities and respective capabilities. The 16th General Review of Quotas (GRQ) aims to uphold the rights of emerging nations in alignment with their relative positions in the global economy.

US Treasury Secretary Janet Yellen expressed confidence in her proposal for an “equi-proportional” increase in IMF quota-based lending resources, despite concerns raised by China. This plan is expected to grant more influence to developing economies within the IMF.

An IMF resolution stipulates that the 16th GRQ should be finalized by December 15, 2023. Any adjustments in quota shares are likely to result in increased voting rights for emerging countries based on their economic standings.

Secretary Yellen’s plan, backed by the US, envisions IMF members contributing to a quota increase proportionate to their existing shareholdings to enhance the Fund’s lending capacity. Decisions regarding modifications to the IMF’s shareholding formula will be addressed at a later time.

Presently, India holds a 2.75 percent quota in the IMF. In contrast, China and the US possess quotas of 6.4 percent and 17.43 percent, respectively, illustrating the prevailing hierarchical power structure within global economic institutions.

While countries like China, Brazil, and India have expressed a desire for greater influence and shares at the IMF, they may need to wait under the current plan. Sitharaman has endorsed the US proposal as a “prompt, interim solution” to the pressing need for an immediate boost to IMF funding. She considers the equi-proportional quota adjustment as a less contentious approach to addressing the issue.

The “money-now, shares later” plan has garnered support among IMF stakeholders. However, IMF Managing Director Kristalina Georgieva has urged a deadline for restructuring the shareholding to grant more weight to large emerging market economies.

India’s central bank governor, Shaktikanta Das, emphasized that interventions in currency markets by emerging economies should not be seen in absolute terms, referencing the US Treasury Department’s foreign exchange report and similar research by the IMF. He called on the United States and other entities to reconsider the use of “labeling such as watch lists,” clarifying that his comments were not directed solely at the Treasury. Das noted that emerging economies need to build reserves, and central banks in these economies are occasionally required to intervene in currency markets to prevent excessive volatility.

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