Quota reform will help bolster IMF's credibility

Editor's note: The reform of international organizations, including financial institutions such as the International Monetary Fund, has become a major topic of multilateral discussions due to the changing global economic landscape and the growing volatility in the international order. Lin Jianhai, former secretary of the IMF, told Securities Times that it is imperative to advance the organization's quota reform. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The international economic governance system has evolved over the past several decades, but its inherent contradictions and structural problems have not been resolved.

This is mainly reflected in the growing underrepresentation in the governance structure, increased fragmentation of multilateral mechanisms, the growing effect of geopolitical competition on global cooperation, and the higher demands imposed on the existing governance system by the rapidly developing emerging sectors.

Against such a backdrop, promoting the reform and restructuring of the global governance system, rebuilding consensus for international cooperation and enabling emerging markets and developing countries to secure a more influential voice have become central topics of international economic governance.

Various international organizations, especially financial institutions, need to accelerate the reform of their governance structures and properly adjust the voting power and representation of their members.

It is essential to establish a fairer financing mechanism geared toward sustainable development, and pay greater attention to developing countries' access to financing and the sustainability of their debt.

Efforts should focus on modernizing and aligning rules related to areas such as the digital economy, climate governance, green finance and energy transition. It's also necessary to strengthen coordination of macroeconomic policies to enhance the resilience of the global economy.

Institutions such as the IMF, World Bank and the World Trade Organization should play a core role in this process. They need to adapt to the changes occurring in the global economy, and collaborate with developing countries in global economic governance, instead of simply providing assistance to these countries.

Emerging economies, for their part, should play a more active role in governance reform and implement relevant policies more vigorously to help build a fairer and more effective governance system.

Understanding how quotas work is central to comprehending the IMF's operations. Each member state is assigned a quota upon joining the organization. This quota is denominated in special drawing rights, or SDRs, and reflects the country's position in the global economy. The quota also determines the member's contribution commitment to the IMF. By the end of 2025, the countries with the largest quotas were the United States, Japan and China.

The quota caps the amount a member can borrow from the institution, determines its voting power, and sets its share in the allocation of SDRs. The larger the quota, the greater the voting power. That explains why quota reform helps elevate the voice and representation of emerging markets and developing countries.

While intensified geoeconomic competition presents substantial challenges to the IMF's quota and governance reform in the short run, such reform is imperative. As the significance of emerging markets and developing countries in the global economy increases, the IMF should grant them matching representation and voting powers. This reform will benefit not only these economies but also bolster the IMF's legitimacy, credibility and effectiveness, thus facilitating sustained and robust growth of the global economy.