IMF shake-up could reduce influence of UK

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Britain and other rich nations could be forced to surrender some of their power at the International Monetary Fund if plans to give China and its fellow Asian tiger economies a greater voice in the globalised economy go through, it emerged yesterday.

The head of the IMF, the world's financial watchdog, will unveil plans tomorrow for a major overhaul of its voting structure and board of directors.

Rodrigo de Rato, the IMF's managing director, also proposed setting up a multilateral forum to try to resolve the massive global financial imbalances it fears could trigger a recession.

This is certain to include the Bric economies - Brazil, Russia, India and China. Mr de Rato will chair a committee of key individuals today to try to help broker a deal.

Mr de Rato said he would propose changes to the voting shares on the fund's key International Monetary and Financial Committee (IMFC), which is chaired by Gordon Brown, on Saturday. "The emergence of strong new economies has to be recognised," Mr de Rato said. "It is not a regional issue but getting new legitimacy for the institution."

Power in the IMF stems from quotas, which are broadly linked to the size of a country's economy. However, these quotas are changed only every five years, with the next review due in 2008.

The US indicated this week it was prepared to give up part of its 17 per cent vote - but only on condition that the European Union, whose members have 44 per cent and seven seats on the 24-strong board, give up some of their share. It has proposed that individual European countries that have votes join under one European Union vote, a suggestion that has not gone down well with the European countries involved.

Mr Rato said: "I am very glad to see that the biggest shareholder in the fund has expressed its support for the agenda. It is not a question of losers and winners. This is about making the institution legitimate and representative of countries based on their places in the world economy. My proposals will be to increase [some countries' voting rights] and that means that countries will adapt to their actual size and there are clear examples of countries that have changed in the last 15 years."

There has been growing pressure for a shake-up of the IMF to reflect the changes in the economy since 1992, the date of the last major reform to voting powers.

Critics highlight Belgium has 2.16 per cent of the executive board vote, compared with China's 2.98 per cent, though Belgium's economy is only one-third the size of China's. Turkey, Mexico and Korea would look for higher shares.

Last week the Institute of International Finance, which represents 345 of the world's biggest financial institutions, called for Europe to accept a lower voting share. Charles Dallara, its managing director, said: "That would not only be in line with progress on European integration but also help increase the voice of emerging markets."

Mr de Rato declined to give details of his proposals for a multilateral forum, but said it would bring together "systemically important countries to work through the impact of global imbalances".