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New Delhi, Oct 6 India on Tuesday made a forcible plea for “far-reaching changes to the governance structure” of the international financial institutions such as the World Bank and the IMF to reflect “the changing dynamics of the global economy”.

Addressing the plenary session of the annual meeting of the Fund-Bank currently under way in Istanbul, the Union Finance Minister, Mr Pranab Mukherjee, asserted that the role of developing countries as drivers of future global economic growth must be recognised.

“Resistance to the overdue change will only detract from the legitimacy, credibility and effectiveness of these institutions,” he warned adding that the “Fund and the Bank cannot emerge from the crisis unchanged. They have to enhance their legitimacy to perform their expanded roles and mandates effectively”.

Elaborating the point further, Mr Mukherjee said that as a first step, the early ratification of the April 2008 package of quota reforms of the IMF was an urgent requirement. He said the next quota review must be completed by January 2010 and in order to preserve the Fund as a quota-based institution, there should be a doubling of quotas at the minimum.

Stating that parity in the vote of shares of developed and developing countries would vastly enhance the legitimacy of the Fund, Mr Mukherjee said this could be achieved through a 7-8 per cent shift in quota shares.

He said that even to achieve the shift of at least five per cent called for by the G-20 leaders in Pittsburgh “we would have to work beyond the current quota formula”.

Mr Mukherjee maintained that the other aspects of governance reform should ensue and flow from the quota rebalancing.

He sought redistribution of the chairs in the Executive Board on a more equitable basis among the regions of the world with the proviso that any changes to the size of the Board should protect the representation of the developing countries.

In the case of the World Bank, Mr Mukherjee pointed out that a year ago, all nations agreed on two phases of Voice reform under which in the first phase, it was proposed to enhance the voice of sub-Saharan Africa and gave greater representation to smaller members. But the shift in voice share was a minuscule 1.4 per cent which should be at least an additional shift of six per cent.

He said the realignment should be based on Bank-specific parameters with economic weight with primacy to GDP-PPP (purchasing power parity) being the main criteria.

Mr Mukherjee also said the recovery of the global economy would be unsteady and long-drawn with growth in employment lagging behind. Hence, he said, “maintaining policy stimulus” was crucial for anchoring the recovery. While balancing the stimulus against the risks of inflation and threats to fiscal viability was a key short-term challenge, India said the medium-term imperatives remain returning output to pre-crisis levels, recovering jobs and continuing the fight against poverty.

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