Azernews.Az

Turkey's top economy czar has criticized the International Monetary Fund (IMF) for failing to deliver on promised reforms on the governance and representation of the world financial body, putting the blame on a group of countries that are set to lose the most from these reforms,Trend news agency reported referring to the Today`s Zaman newspaper.

In an exclusive interview with Today's Zaman, Deputy Prime Minister Ali Babacan said on Tuesday that the third round of reforms in the IMF has not yet been implemented despite the leaders of the G-20, a group of world's richest nations, agreeing to move forward on new governance and representation reforms.

"There are some countries that oppose these reforms because they are set to lose from the new changes," he said, without naming individual states.

As growing economies like Turkey, Brazil, Mexico and others voice their demands for a greater say in the IMF to reflect the changing picture of the world economy amid economic woes in developed countries, Europe, overrepresented in the world's greatest lender, is expected to cut its representation on the IMF's board of members as well as in various agencies.

Babacan said there seems to be new difficulties in moving forward on promised reforms in the third round because of a lack of consensus among IMF members, in contrast to the first and second round of reforms.

With changes adopted in December 2010 at a meeting of the Board of Governors, the highest decision-making body in the IMF, Turkey not only increased its quota in the IMF, but also received the chance to put a Turk in one of the seats at the IMF Executive Board. The current IMF board, which has 24 executive directors (five appointed and 19 elected), will be converted into an all-elected board, giving more clout to countries like Turkey.

Babacan said that as a result of changes Turkey also changed its constituency in the IMF groupings and is now represented in the group of countries that includes Austria, Belarus, the Czech Republic, Hungary, Kosovo, the Slovak Republic and Slovenia.

"We will assume the position of executive director in 2014 for two years representing this constituency in the IMF, followed by Austria and Hungary for one-year periods. In 2018, we again assume the position for two years," Babacan explained, adding that during the period of Austrian and Hungarian representation Turkey will hold a deputy executive director's position. "In other words, Turkey will be represented strongly in the IMF body at all times," he added.

If this happens, it will be the first time in IMF history that Turkey will be represented on the Executive Board.

Turkey received a boost in 2008 when the IMF revised quotas for 54 of its member countries, including Turkey, whose quota was increased from SDR (Special Drawing Rights) 1.2 billion in IMF special currency to SDR 1.45 billion. Since the quota largely determines a member's voting power in IMF decisions, Turkey's voting power was also increased from 0.55 percent to 0.61 percent.

But the real lift came two years later in 2010 when the IMF approved a package of far-reaching reforms for IMF quotas and governance rules during the 14th General Review of Quotas. Accordingly, Turkey's quota jumped to SDR 4.6 billion (approximately $7.2 billion) from SDR 1.45 billion and its voting power increased to 0.98 percent.

Turkey ranked fourth among countries that had the largest increase in their quotas since the 2008 reform. New increased quotas moved Turkey to 20th place from 36th place in the 2010 reform.

Economically advanced European countries agreed to give up two seats on the board to be filled by two emerging countries. But the agreement has not yet been implemented from the second reform package.

During the G-20 summit held in Mexico last year, Turkey, along with Australia, co-chaired the International Financial Architecture Working Group, which seeks to tackle reform issues at the IMF. During the briefing at the G-20 Meeting of Finance Ministers and Central Bank Governors in Mexico City on Feb. 26, 2012, Babacan emphasized to his colleagues that the timely completion of the IMF quota and governance reforms is very important and called on member states to ratify changes to the IMF agreement.

In a final communiqué approved at the end of this meeting, members pledged to continue working towards reforming quotas and governance rules of the IMF in line with the commitments made at the Seoul and Cannes G-20 summits.

Once three-fifths of IMF member states, which have 85 percent of the total voting power, approve amendments to the IMF agreement, the 2010 Governance and Quota Reform will come into effect. This will be followed by a more comprehensive review of the quota formula that will better reflect the economic influence of IMF member countries by January 2013. The next general review of quotas will be completed by January 2014.
Rating agencies trail behind

Babacan also criticized credit rating agencies for failing to project developments in national economies, saying that economic crises left these agencies struggling to catching up with what is going on. "Normally they are supposed to tell something to investors about the future. After the crises, they have scrambled to understand what is happening. For that reason, their effectiveness has diminished a little bit compared to the past," he explained.

He also downplayed the significance of the Turkish government's decision not to sign a deal with Standard & Poor's (S&P) recently. "We had a deal with S&P's and Fitch last year. This year we signed an agreement with Fitch and Moody's," Babacan explained, adding that S&P has already announced it will continue to offer rating services for Turkey.

Ankara criticized S&P harshly in May following the credit rating agency's decision to cut the outlook on Turkey's BB sovereign credit rating from positive to stable. Fitch rates Turkey at investment grade at BBB- while Moody's rate it just below investment grade at Ba1.