IMF is a specialised agency of the United Nations with its charter, governing structure and finances, while its members are represented through a quota system broadly based on their relative size in the global economy. Official documents exclusively obtained by the Business Recorder show that the Board of Governors (BoG) of IMF had approved certain amendments upon review of quota and reform of Executive Board.
The reforms ensure proper presence of emerging economies, both in terms of quota representation and size of the Executive Board of IMF. The State Bank of Pakistan, in consultation with the Finance Division, had cast a positive vote for the amendments, the documents show.
According to IMF website, on December 15, 2010, the Board of Governors of the International Monetary Fund (IMF) approved a package of far-reaching reforms of the Fund's quotas and governance. These reforms represent a major realignment in the ranking of quota shares that better reflect global economic realities, and a strengthening in the Fund's legitimacy and effectiveness.
This completes the 14th General Review of Quotas with an unprecedented doubling of quotas and a major realignment of quota shares-a shift of more than 6 percent from over-represented to under-represented members and a more than 6 percent quota shift to dynamic emerging market and developing countries. The reforms also protect the quota shares and voting power of the poorest members. The Board of Governors also supported an amendment to the Articles of Agreement that would facilitate a move to a more representative, all-elected Executive Board.
Members will make best efforts to complete their domestic approval processes of these reforms by the Annual Meeting of the Board of Governors in October 2012. The 2010 reforms build on an earlier set of reforms that were approved by the Board of Governors in April 2008 and came into effect on March 3, 2011, with the acceptance of the 'Voice and Participation' amendment to the Articles of Agreement by 117 member countries representing 85 percent of the total voting power. (The requirement for amendments to the Articles to enter into force is acceptance by at least three-fifths of members, representing 85 percent of the total voting power.)
The 2008 reforms strengthen the representation of dynamic economies, many of which are emerging market countries, through ad hoc quota increases for 54 member countries. They also enhance the voice and participation of low-income countries through (i) an almost tripling of basic votes-the first increase since the IMF's creation in 1945, (ii) a mechanism that, going forward, will keep constant the ratio of basic votes to total IMF voting power, and (iii) enabling Executive Directors representing 7 or more members to each appoint a second alternative executive director following the 2012 regular elections of Executive Director.
For the 14th General Review and associated reforms to also come into effect, (i) the proposed amendment to the Articles of Agreement on reform of the Executive Board needs to be accepted by at least three-fifths of IMF members representing 85 percent of the total voting power, and (ii) members representing at least 70 percent of the total quotas on November 5, 2010 must consent in writing to their quota increases. Many member countries will need the approval of domestic legislatures to accept the proposed amendments to the Articles of Agreement.
Official documents suggest that IMF now requires its member countries including Pakistan to give their consent to acceptance of amendments by fulfilling the following three conditions: (i) measures that may need to be taken under national law to enable a member to accept the proposed amendment which may constitute a modification of an international agreement; (ii) the acceptance should be affected on behalf of the member by the competent person or body; and (iii) the acceptance should be communicated to the Fund either by the declaration of acceptance or by a notification of acceptance.
The case was referred to the Law and Justice Division. In response, Law and Justice Ministry, in a letter, has intimated that since SBP has already voted the resolution by observing necessary formalities, for the time being there is no need to carry out any amendment in the domestic law.
Regarding the issuance of declaration of acceptance of amendments approved by the BoG of IMF, Finance Ministry has pointed out that in 2008, in a similar case, it issued the acceptance on the advice of Law Division and with the approval of Prime Minister. The Prime Minister, while approving the issuance of acceptance for amendments in articles of IMF agreement, had directed Finance Division to regularise the decision by submitting a summary to the Cabinet.