WASHINGTON - In a historic decision, the International Monetary Fund board on Friday boosted voting power of big emerging economies and made China the third leading voice of the global lender.
IMF chief Dominique Strauss-Kahn announced the structural reforms after a Friday meeting of the IMF's board.
It elevates China's voting power above such traditional major IMF European powers such as Germany, Britain and France.
"This historic agreement is the most fundamental governance overhaul in the Fund's 65-year history and the biggest ever shift of influence in favor of emerging market and developing countries to recognize their growing role in the global economy," IMF Managing Director Dominique Strauss-Kahn told a news conference.
Under the deal, first clinched by finance ministers of Group of 20 leading economies in South Korea last month, 6 percent of IMF voting shares will be transferred to "dynamic" emerging market countries from industrial economies.
The move vaults China over European powers Germany, France and Britain into third spot under the United States and Japan. It also lifts other large emerging powers India, Brazil and Russia into the top 10 ranks of the 187-member institution.
Emerging economies have slowly gained more clout in the IMF, but Friday's shift is by far the most significant and amounts to an overhaul of the global economic order established when the IMF was set up after World War Two.
The US retains a 17 percent voting stake in the IMF, effectively giving it veto power because major decisions require an 85-percent majority to pass.
The IMF also announced reform of the governing board's membership, expanding its top tier from five to 10.
Currently, there are five countries that essentially make up the top group in the IMF's 24-member Executive Board as they are always represented: the US, Japan, Britain, France and Germany. This group is now expanded to 10 with the addition of China, India, Brazil, Italy and Russia.
All the Board's proposed reforms will have to be approved by the full 187-nation membership, and ratified by the US Senate and other countries' parliaments.
The IMF's total board membership would be pegged at 24 members, including other developing nations. It's composition would be reviewed every eight years, starting when the quota reform takes effect.
Strauss-Kahn said that major European countries will reduce their Board seats by two when the reforms take place.
Poorer nations have long attacked the system for giving too much weight to the United States and its allies in Europe, and noted the traditional power-sharing arrangement that put a European at the head of the IMF and an American atop the World Bank, its sister institution.