WASHINGTON (AP) - Global finance officials hoped to make progress Saturday on remaking the International Monetary Fund to give countries with emerging economies a greater voice in its operations, but their talks were clouded by controversy surrounding World Bank President Paul Wolfowitz.
While the IMF passed reforms at a meeting last year in Singapore increasing the voting shares of China, South Korea, Turkey and Mexico, other nations chafed at having to wait two years to see their voting shares adjusted -- too long for some countries.
Argentine Economy Minister Felisa Miceli, the chairman of the Group of 24 developing countries, said increasing the voice and representation of the developing countries at the IMF and its sister institution, the World Bank, 'remains of the utmost importance for the legitimacy and effectiveness' of the two 62-year-old organizations. 'It would increase their democratic legitimacy.'
IMF officials hope they can build a consensus to take the problems of developing countries into account. IMF Managing Director Rodrigo de Rato said he is trying to convince IMF members that increasing the influence of developing countries is vital to projecting the organization's credibility.
Smaller European countries , which stand to lose influence if IMF voting rights are recalculated to reflect growth in other parts of the world, argue the formula to determine these rights should not emphasize the size of an economy. Large developing countries, however , want economic might to factor heavily in determining the distribution of voting rights.
In advance of the weekend meetings of the IMF and the World Bank, finance ministers from the world's seven leading industrial countries -- the United States, Japan, Germany, Britain, France, Italy and Canada-- projected confidence that the various troubles such as soaring trade deficits, jittery financial markets and a slumping housing market in the United States would not be enough to derail strong growth in the world's economy.
The G-7 finance ministers pledged to make structural reforms in their own economies to reduce the yawning trade gaps and called on China to do more to introduce flexibility into its currency system, which U.S. manufacturers believe is necessary to curb China's huge trade surpluses.
All of the talks were being overshadowed by the Wolfowitz controversy and his involvement in a huge pay raise awarded to a close female friend
The disclosures have triggered demands for the resignation of Wolfowitz, a former deputy defense secretary and one of the architects of the Bush administration's Iraq war strategy.
Asked about the controversy, Treasury Secretary Henry Paulson called him a 'very dedicated public servant' and said he believed the review process under way by the World Bank's 24-member board should be allowed to proceed. French Finance Minister Thierry Breton said the same thing.
However, Paulson said waiting for this process to be completed should not be read 'as any lessening of support for Paul' by the United States.
The finance discussions were occurring at a time when the global economy, according to the IMF's new forecast, is expected to grow at a rapid 4.9 percent both this year and in 2008.
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