G20 summit agrees to reform IMF

BBC | 23 October 2010 | 11:29 GMT

Finance ministers from the G20 leading economies have agreed reforms of the International Monetary Fund, giving major developing nations more of a say. At a meeting in South Korea, they agreed a shift of about 6% of the votes in the IMF towards some of the fast-growing developing countries.

G20 South KoreaThose nations will also have more seats on the IMF’s Board, while Western Europe will lose two seats. But the US will retain the veto it has over key decisions. Such decisions require an 85% vote – Washington holds 17% under the IMF’s weighted voting system.

‘Currency manipulation’

During the talks in the South Korean city of Gyeongji, the ministers also agreed to move towards more market-determined currency systems. The pressure has been on China to end its policy of holding the yuan down to maintain its competitiveness. There was, however, no timetable for change, so Beijing has kept to its long-held position that it will reform its currency policy, but gradually.

Another element in the tension over exchanges rates is the flood of investment funds going to developing countries, which tends to push their currencies higher, undermining competitiveness. This is partly a result of policies in the US, which mean investors are seeking higher returns elsewhere.

German Economy Minster Rainer Bruederle suggested that US policies, if not reversed, amount indirectly to currency manipulation – an accusation more often leveled at China.

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