Interpreting the New Developments in the World Bank Voting Reform

  2010/5/6 source：

April 25, the World Bank and IMF Development Committee had approved the proposal of the voting reform to give developing countries a bigger say in World Bank and China became the third voting power at the World Bank,

Why did the meeting focus on this issue? What are the focuses and disagreements about the reforms of the two major financial institutions? What does it mean to China to have bigger voting power? Dr. Zha Xiaogang of SIIS will analyze for you.

This was a joint IMF/World Bank Spring Meeting. On April 24 the meeting of IMFC; and on April 25, the meeting of IMF Development Committee.

The theme of this meeting was the prospect of global economic recovery, regulation of financial institutions, the role and reform of international financial institutions and so on. The one that got the most attention and eventually achieved the most important result is the World Bank voting reform. Last September, the Pittsburgh Summit had decided that World Bank and IMF to take actions on the voting rights. Meanwhile, this was also the touchstone to see whether the two financial institutions could make substantial reforms after the financial crisis. Therefore, it was emphasized in the discussion among countries and drew a lot of media attention.

As expected, the meeting announced that the proposal of World Bank voting reform was approved. According to the reform, developed countries would transfer 3.13 percentage point of voting power to the developing countries; the move increased developing countries’ voting power from 44.06% to 47.19%. China’s voting power raised from 2.77% to 4.42%, gaining the third voting power next to the United States and Japan.

Accordingly, traditional European powers’ voting power decreased. Germany’s voting power decreased from 4.35% to 4.00%; France’s decreased from 4.17% to 3.75%; Britain’s decreased from 4.17% to 3.75%. The United States kept its 15.85% voting power, maintaining its position as the biggest shareholder.

For Asian countries, Japan’s voting power decreased from 7.62% to 6.84%. Although Japan lost the most in the reform, it was still the second biggest shareholder. India’s voting power increased from 2.77% to 2.91%, becoming the seventh.

Such a result was a historical progress. According to Chinese Finance Minister Xie Xuren, “this is the first reform which aims at enhancing the voice and participation of developing and transition countries in the World Bank's history." "It will contribute to achieving the ultimate goal of equitable voting power between developing countries and developed ones."