Sunday, 22 April 2012

Union Finance Minister Pranab Mukherjee’s Intervention Statement at Joint IMFC-G20 Session in Washington D.C.

Since January 2012, when the Managing Director made a proposal to augment IMF’s resources, several landmark developments have taken place which have brought about a welcome change in the global economic and financial environment. In view of these developments, a measure of calm has been restored. But, several uncertainties and downside risks continue.

We welcome the recent efforts by EU to raise the size of its firewall and we request that these efforts should continue to play the primary role in addressing the needs of members of the EU as and when the situation so demands. We also feel that IMF assistance should only underpin the EU’s efforts and play a catalytic role in order to provide confidence to investors. 

Any bilateral financial contributions made should be voluntary. It should not be linked to reform of quota formula. Further these contributions should not be looked upon as a substitute to quota resources. It is important that innocent bystanders affected by the crisis, particularly the PRGT covered and low income countries are adequately protected and there should be sufficient resources available for them. 

India has already ratified the 2010 quota increase. We have also confirmed that we will maintain our relative share of the new arrangements to borrow. Considering the gravity of the economic uncertainties we support the new funding initiative. Our exact contribution will be announced in due course. 

India will continue to play its role to assist the IMF in its efforts to augment permanent resources. However, governance issues are also linked with this and we are disappointed at the pace of the reform on quota and governance issues. A dynamic process of reform is necessary to ensure the legitimacy and effectiveness of the Fund and the best possible means to improve governance and legitimacy is by ensuring that there is no slippage on crucial reforms. 

The Quota Formula is due for review by January 2013 and it is important that there should not be any slippage in the target date in this regard. The quota formula is of central importance since quotas are the main determinant of the voting power of members. For the emerging and developing countries, GDP is the most important variable in the quota formula and the weight of the blended GDP variable should be substantially increased in the formula. Our objective is a simple formula with GDP blend as either the sole or predominant variable and with a higher share of GDP-PPP. 

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