London: The US has responded "positively" to a proposal to give India and other leading emerging economies a much greater say in the running of international financial architecture, a source privy to global ongoing discussions in London said.
American Treasury Secretary Tim Geithner who attended the latter half of a meeting of the finance ministers of Brazil, Russia, India and China (BRIC) in London Friday was briefed on the BRIC demand for a seven percent shift in International Monetary Fund (IMF) quotas that determine a country`s voting powers.
Geithner, whose move to attend a BRIC meeting was described by Indian Finance Minister Pranab Mukherjee as an acknowledgement of the increasing importance of these four countries on the world stage, also heard demands of a six percent shift in the World Bank`s quotas and shares in favour of emerging economies.
"He responded positively," a source who was privy to the discussions said.
"The US position paper has mentioned a figure of five percent, which in any case is very close to the BRIC position. It`s virtually the same," the source added.
Reforms to IMF and World Bank governance have emerged as one of the most pressing issues for BRIC countries that have showcased their economic growth at the Sep 4-5 gathering of the world`s economic powerhouse - the Group of 20 - in London.
They feel the current rules governing the way the international economy is run by the IMF, World Bank and other international financial institutions do not represent the ground realities of the 21st century, a point that was stressed by Mukherjee Friday.
BRIC countries were able to not only protect but continued growing their economies in the midst of a global economic downturn through a mixture of strong regulation, prudent government intervention and an aggressive growth model.
"Emerging markets were not the cause of the ongoing financial crisis as their financial systems were conservatively regulated," Mukherjee said Friday.
BRIC countries are of the view that advanced developed countries must learn from the their and avoid short-term measures that can affect global trade and financial flows.
"The IMF cannot emerge from the crisis unchanged," Mukherjee said in comments that reflect a long-standing Indian demand for IMF reform.
"Financial stability has to be included in its mandate to institutionalise the relationship with the Financial Stability Board. This should lead to more even-handed surveillance of all systemically important economies," Mukherjee said.
The BRIC countries, which are expected to lead global economic recovery, have decided to put in USD 80 billion into the IMF to help economies struggling with the current crisis, but have warned that further injection of fund is conditional on immediate IMF reforms.
The reforms should begin "now" and conclude by the end of the year, said Brazil`s Guido Mantega.
Other key demands include:
- Scrapping the current system under which only developed country candidates get to become the IMF managing director or World Bank president; and
- Changing the IMF and World Bank executive boards to allow for "more adequate" representation of emerging economies and developing countries.