Important Changes: The World Bank & IMF Spring Meetings

Apr 26th, 2010 6:02 PM UTC
By Alison Foster

Some critics of the World Bank have focused on the disproportionate amount of voting power that the United States and Western European countries have compared to the rest of the world. India, China and Brazil in particular have argued that the voting procedures of the World Bank members do not accurately represent the world economy. Yesterday, the World Bank and International Monetary Fund (IMF) ended their annual spring meeting by announcing “historic” and unexpected changes. For the first time in its history, the World Bank took steps to redistribute voting power while at the same time asking for a capital increase.

The first change that came from the meetings was an agreement by member states to increase the World Bank’s lending resources by $86 billion. This is the first capital increase the bank has made in nearly 20 years, and it comes at a critical time. Because of it, the World Bank will be able to uphold its current agreements and continue lending money, in spite of the setbacks of the economic crisis.

The other significant change is the redistribution of voting power among member states, giving more power to developing countries. This redistribution increased the power of developing countries by three percent, to over 47% of the total power shared by member states. China’s influence in particular increased among member states as it was promoted to third among shareholders, behind the United States and Japan and ahead of Germany. India’s influence also increased to 7th, while Brazil, Russia, and Turkey were given more power as well. Many Western European countries who have traditionally dominated international finance, such as the UK, Canada, and France saw their influence decline due to the redistribution.

World Bank President Robert Zoellick endorsed the changes by saying that, “the shift in voting power is crucial for the Bank’s legitimacy. It recognizes that we need to consign outdated concepts like ‘Third World’ to the history books. He continued, “Today, the world is moving towards a fast new evolving, multipolar world economy.” These changes represent a turning point in the distribution of power within the World Bank. The promotion of developing countries and the reallocation of power from traditional leaders show that the World Bank and the International Monetary Fund are successfully changing their policies and structures in order to more accurately represent the evolving world economy.

TAGS: IMF, Policy News, World Bank