The head of the International Monetary Fund (IMF) has backed reforms that could give China more voting rights, warning of "devastating" consequences if the IMF still does not have enough financial resources to aid countries in trouble.
In an interview with the Financial Times, Kristalina Georgieva called on the IMF to better reflect changes in the global economy over the past decade, including the rise of China.
"There is a need for constant change to reflect changes in the world economy," she said. She alluded to the fact that China's 6 per cent voting share in the IMF was out of step with its weight in the world economy, which is about three times as large.
Ms Georgieva noted that she was encouraged by the "many times since the [COVID-19] outbreak that the IMF has been able to mobilise and overcome differences of opinion". "I'm optimistic that we're going to get there," she said of the voting rights change.
Traditionally, each IMF member has a so-called quota based on its position in the world economy, which determines how much it pays to the IMF, as well as its voting weight in the institution and access to emergency financing.
Currently, China's quota is lower than Japan's, despite its larger share of global gross domestic product. As the IMF's largest shareholder, the United States holds about 17 percent of the shares, giving it veto power over quota decisions, which require 85 percent support.
The last time quota changes were agreed was in 2010, and China's economy has grown significantly since then. The changes took effect in 2016.
Ms Georgieva's call for a rethink of IMF representation comes amid US efforts to bolster Washington-based multilateral institutions to boost western influence in emerging markets and developing countries.
At the same time, she is working to increase the resources of her agency to deal with economic problems around the world.
"We are at the centre of the global financial safety net," she said. "If the IMF fails to step up and give confidence to others, the damage from an economic, social and security perspective could be profound."
Speaking ahead of this month's IMF and World Bank meetings in Marrakesh, Ms Georgieva acknowledged that changing voting weights was not on the agenda for the quota review. The review is due to conclude in December.
To push for more resources, the United States wants to increase member countries' quotas without an immediate redistribution of voting power, while changing governance to give developing countries a greater role.
Georgieva said the change was supported by a "very substantial majority" of IMF members and would make the fund "stronger in the future."
Us officials have left open the possibility of supporting a reallocation of shares at a later stage, but have indicated they would veto any move to expand China's voting power for now.
Jay Shambaugh, US Treasury undersecretary for international affairs, said the move would require "all countries - especially those whose quotas will increase" to respect "the IMF's role and norms".
Ms Georgieva stressed that the IMF was calling on its shareholders to provide more resources at a time when the global economy could be hampered by lacklustre growth.
"Given how much work remains to be done, we are simply not getting the growth we need." Fiscal space is eroded, debt levels are rising everywhere, debt service costs are rising, but the demands on public finances are high."
Georgieva defended the agency's involvement in climate-related issues, food security and health.
"It is inevitable that the role of the IMF will change because the world around us is changing," Georgieva said. In the aftermath of COVID-19, she said, "getting health policy in good shape to operate efficiently and effectively at the time is the most important economic policy." She also believes that climate shocks can affect economic and financial stability.
Ms Georgieva rejected criticism that the IMF had failed to monitor countries such as Argentina and Pakistan. These countries have repeatedly sought IMF loan support, sometimes just to repay the interest on IMF loans.
Georgieva said the IMF must provide assistance "in a compassionate manner," while also agreeing that lenders cannot help countries that are "unwilling or unable to take the necessary measures."