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Germany Supports IMF Reforms But Harbors Concerns

DW staff (kjb)September 19, 2006

The IMF and the World Bank decided at their annual conference in Singapore to give four member states more say and increase anti-corruption efforts in developing countries. Germany agrees -- with some reservations.

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The IMF aims to support economic growth, especially in crisis areasImage: AP

The International Monetary Fund and the World Bank on Monday raised the contribution quotas of China, South Korea, Mexico and Turkey by a total of 1.8 percent in recognition of recent economic development there. Quotas for other countries in the 184-member organization were reduced accordingly.

German Finance Minister Peer Steinbrück called the decision, approved with 90.6 percent of the vote, a "very good result." He also said that he considers Germany underrepresented.

As part of the agreement, Germany's quota was reduced by 0.1 percent, putting it at just under 6 percent. The US, with 17 percent, remains the most strongly represented country in the group.

Steinbrück wants equality for EU countries

Peer Steinbrück in Singapur
Steinbrück met with Singapore's PM Lee Hsien Loong at the IMF-World Bank conferenceImage: AP

"The principle of equal treatment and fair burden distribution should be strictly applied to all IMF members," said Steinbrück, adding that the risks associated with the IMF's planned quota reforms should be taken into account.

In the most widely reaching reforms in its 60 year history, the IMF is planning additional quota changes over the next two years. India, Egypt, Brazil and Argentina are also candidates for higher quotas due to economic progress in their countries.

Quotas are currently a factor of the economic strength of the member country and determine both its financial contribution to the IMF and its say in decision-making processes.

In a speech Tuesday in Singapore, Steinbrück said Germany would remain closely involved in the reform process. He also reiterated Germany's position that economic openness and a country's degree of integration into the global economy be added to the quota criteria.

Anti-corruption strategy passed


In addition to quota adjustments for member states, a controversial anti-corruption strategy was approved at the IMF-World Bank conference. Loan programs and other World Bank projects in developing countries are to be scrutinized more closely.

Augusto Pinochet
Critics say World Bank loans contribute to former Chilean dictator Pinochet's successImage: AP

According to the new strategy, funds can be suspended or revoked if the government of the recipient country does not make adequate attempts to hinder corruption.

"We have to make sure that money is spent on text books and medicine and doesn't end up in the pockets of those in power," said World Bank President Paul Wolfowitz.

Some development organizations, however, are concerned that the new approach may be too stringent.

"The bank's strategy doesn't work when it's used to deny loans or demand privatization," said representatives from the development organization Oxfam.

The World Bank estimates that $1 billion (790 million euros) are lost each year to corruption.