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SINGAPORE -- The International Monetary Fund is expected today to approve a U.S.-backed overhaul giving four fast-growing countries a greater say in the global lender's operations and paving the way for broader changes by 2008.
"This was a reform summit to create the IMF of the future," said Gordon Brown, Britain's chancellor of the exchequer and chairman of a key IMF oversight committee.
Treasury Secretary Henry Paulson endorsed the plan Sunday as "a small down payment" on broader reforms. The two-stage package is billed as the biggest makeover in IMF governance in 60 years.
But the plan is opposed by key economic powers, including Brazil and India, and will trigger intense skirmishing about the new formula the IMF eventually will adopt to complete its internal realignment.
Poor countries, in particular, fear their already weak representation could ebb further. "The current package of reforms does not adequately address the problem of under-representation of developing countries," said Philippines Finance Secretary Margarito Teves, chairman of the G24 group of developing countries.
Nations enjoying a greater say than their economic punch warrants, such as Belgium and the Netherlands, worry that any new approach will cost them. (The U.S., which has 17% of the IMF votes but accounts for 30% of the global economy, says it won't seek a larger say.)
The reform, the centerpiece of the fund's annual meeting this week, reflects the dramatic changes in the world economy in recent years, such as the rise of Asia and an enormous expansion in global capital flows.
First to benefit: China, Turkey, South Korea and Mexico, the countries suffering the biggest gap between their share of IMF votes and the size of their economies. The measure, expected to be approved today, will trigger only modest changes immediately. China, for example, will see its share of IMF votes rise to 3.7% from 2.98%.
The U.S. sees the overhaul as a critical step in preserving the IMF's legitimacy. Created in 1944 to promote global financial stability, the fund remains tilted toward the economic powers of an earlier day.
The mismatch between individual countries' economic heft and their voting shares has become increasingly controversial following the financial crises that began in Asia in 1997. Smaller countries that accepted IMF bailouts in the 1990s resented the harsh conditions the fund attached to its loans, especially since the borrowers had so little say in the fund's operations.
Many Asian and Latin American nations responded by accumulating enormous stockpiles of foreign reserves to avoid new fund borrowing. Now, without major reforms, IMF officials worry they could abandon the fund entirely in favor of new regional groupings.
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