India cautions against slowdown in IMF quota reforms

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Expressing its disappointment at the pace of reform on quota and governance issues in the International Monetary Fund (IMF), India has said that a dynamic reform process is necessary to ensure IMF's legitimacy and effectiveness.

"The best possible means to improve governance and legitimacy is by ensuring that there is no slippage on crucial reforms," Finance Minister Pranab Mukherjee said on Friday at a joint session of the policy making International Monetary and Financial Committee (IMFC) and G-20.

Stressing the central importance of quotas as the main determinant of the voting power of members, he said there should not be any slippage in the January 2013 target date for quota formula review.

For the emerging and developing countries, GDP is the most important variable in the quota formula and the weight of the blended GDP variable should be substantially increased in the formula, Mukherjee said.

"Our objective is a simple formula with GDP blend as either the sole or predominant variable and with a higher share of GDP-PPP," he said.

Mukherjee said India has already ratified the 2010 quota increase and also confirmed that it will maintain its relative share of the new arrangements to borrow.

"Considering the gravity of the economic uncertainties we support the new funding initiative," he said but India's contribution will be announced in due course.

"India will continue to play its role to assist the IMF in its efforts to augment permanent resources. However, governance issues are also linked with this," Mukherjee said.

Earlier, addressing the Financial Action Task Force (FATF) ministerial meeting, Mukherjee said India appreciated the FATF efforts in issuing the new international standards to combat money-laundering, terrorist financing and proliferation financing.

Reiterating India's support to FATF process and to the extended mandate being sought up to 2020, he said India will fully contribute with member countries in developing suitable assessment methodology and procedures.

"India is committed to implement these recommendations in an effective manner and contribute towards the global efforts to ensure integrity of the financial system," he said.