Union Finance Minister’s Address to G-24 Finance Ministers’ Meeting
Following is the text of the speech of Union Finance Minister’s Address to G-24 Finance Ministers’ Meeting delivered on October 7, 2010:
“Recent developments in the global economy indicate that that resumption of self-sustaining growth may be more sluggish and protracted than anticipated. The major concern is the employment situation – a jobless recovery has put millions of lives on hold. Poverty has actually increased in many parts of the world. There are dangers of financial sector concerns could permeate into the real sectors, with adverse implications for employment and economic activity. The emerging markets and developing countries have weathered the crisis somewhat better, but still need to be very vigilant of vulnerabilities and spillover effects. Food price rise is also now a concern. We need the Fund and the Bank to perform their respective mandates very effectively.
IMF Quota and governance reform:
Governance reform will be central to the legitimacy and effectiveness of the Fund’s mandate and we see quota realignment as the central element of governance reform. EMDCs now represent 47.5 per cent of the global GDP in PPP terms in 2009. But they have a quota share of only 39.5 per cent. Hence, we call for what we believe is a very modest shift of 5 to 6 per cent in quota shares from advanced countries to EMDCs to better reflect current global economic realities.
The Fund will really be seen to have changed only if the shift comes primarily from advanced economies to the EMDCs and not mainly by internal readjustment of quota shares amongst EMDCs. The burden of the committed protection for poorest countries should be borne entirely by advanced economies.
There is still enough time before the deadline of January 2011 set by the IMFC to correct the approach taken and work out a technical solution based on an enhanced role for PPP-GDP in the ad hoc allocation and with lower levels of protection for calculated quota shares to achieve the desired objectives.
The size of the quota increase should be calibrated to achieve the targeted realignment. The possibility of future realignments of quotas should not be precluded by too large a quota increase in the current round. The more immediate governance issue which has to be resolved on a much shorter time frame is the election of Executive Directors. We expect the process would result in enhanced representation of EMDCs
World Bank: On the World Bank front let me flag two sets of issues.
a. First, through Voice reform, we have secured an additional chair for Sub-Saharan Africa, a commitment to move towards parity for DTCs and a periodic realignment beginning in 2015. On the capital front, we have managed to enhance the lending capacity of IBRD significantly so that it continues to be a source of knowledge and resources for developing countries.
b. Second, more importantly, we have concerns for the future. The World Bank is stretched to the limit and needs more resources to be a multilateral buffer for poorer countries. We need an ambitious IDA16 replenishment with out-of-the box thinking to make it more sustainable in the long run. The Bank needs to continue to maintain its core focus on poverty alleviation without a proliferation of goals. In the context of climate change, it should focus on providing access to energy to all at the cheapest cost. The Bank needs to refocus on agriculture and infrastructure. In all these areas, the G24 can be an effective forum for us to coordinate our actions and secure results that benefit our development goals.”
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