WASHINGTON — China, India, Russia and Brazil will have a collective veto over the International Monetary Fund’s use of a $600 billion credit line under an agreement reached this week, Brazil’s representative at the institution said Friday.
The so-called BRIC nations will together have more than 15 percent of votes, the new threshold to block activation of the new credit line, said Paulo Nogueira Batista, Brazil’s executive director at the IMF.
This would put the four-nation group on par with the U.S., Japan and European countries, strengthening their influence two months after Group of 20 leaders agreed to give “underrepresented” emerging economies more clout at the IMF.
Greater formal power for BRIC countries “increases the extent to which all key players see them as crucial to consult, including the senior management of the IMF and senior policy-makers in other major economies,” Ngaire Woods, a professor of international political economy at Oxford University, said Friday. “This is just the beginning of a major reshifting of power at the IMF.”
To obtain the 15 percent of votes, the four countries will need to increase their contribution to the credit line, known as the New Arrangements to Borrow, by at least $10 billion, from the $80 billion that they have already committed.
Brazil raised its pledge to $14 billion from $10 billion Nov. 25 and Finance Minister Alexei Kudrin said Friday that Russia was in talks with the other BRIC nations on boosting funding for the IMF, without specifying what Russia would do.
The agreement on the NAB was struck after a meeting between its current 26 members and 13 potential new participants, the IMF said Nov. 24. It extends an older credit line reserved for severe crises to “as much as $600 billion” as contributing countries agreed to fold their commitments made over the past months into one pool.
The accord goes beyond a pledge by G20 leaders to contribute up to $500 billion to a credit arrangement that’s currently worth $54 billion. The worst financial crisis since the Great Depression prompted more economies to seek aid from the fund, created after World War II to help ensure the stability of the global monetary system.
The agreement “formalizes something that was already beginning to occur in the last year,” Nogueira Batista said. “BRICs were increasingly becoming an effective voice in the fund and in the G20, a voice that’s being taken into account.”
The NAB agreement needs to be approved by the IMF board of executive directors and then by participating countries, and so it won’t come into effect before next year, Andrew Tweedie, who heads the IMF Finance Department, said in a Nov. 20 interview.
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