IMF faces crunch time

A politically contentious plan to revamp the 61-year-old International Monetary Fund and give rising economic powers more say will be hotly debated when world financial leaders gather in Singapore this week and next.
The meetings are one of the rare times when finance chiefs from both rich and poor countries can discuss the state of the world economy. The IMF says economic risks have risen given increased inflationary pressures, high oil prices and a slowing US economy.
The talks are being held under tight security in the tropical island state, a staunch US ally and a major base for many Western businesses that sees itself as a prime terrorism target. At issue is how to distribute the voting power of the IMF's 184-member countries to recognise a shifting order in which emerging economies are more influential. China now has the world's fourth-largest economy.
The changes would help boost the IMF's legitimacy in developing countries' eyes after it was criticised for its handling of the 1997/98 Asian financial crisis. Member countries will vote in Singapore to overhaul the fund's arcane voting structures, starting with a one-off rise in the voting power of China, Mexico, South Korea and Turkey. A second, more controversial phase, will seek further adjustments of voting rights based on a new formula and increases in so-called basic votes to benefit poor countries.
The European Union has backed the plan but demanded it be treated equally in any radical revamp, while the United States has said it wants to maintain its dominant voting power.
Finance chiefs will also pore over proposals to increase the IMF's watchdog role over a more integrated global economy, where the potential is now even greater for financial crises to spill across borders. The IMF has offered to broker a solution to the imbalance problem in talks with the United States, Japan, China, the euro area and Saudi Arabia.
Rebalancing the global economy took on more urgency this week as the US trade deficit widened to a new record in July and policy makers said faltering global trade talks will increase protectionism.
IMF Managing Director Rodrigo Rato has said the IMF will forecast growth in 2006 of around 5 percent in its World Economic Outlook expected to be released at 0200 GMT on Thursday.
Nearly 23,700 delegates are estimated to descend on Singapore, a financial and shipping centre. Singapore is banking on the meetings to draw attention to its development and Asia's growth, which the IMF has said has been "nothing short of dazzling".
But a government decision to bar 28 activists from entering the country has been controversial, detracting from its efforts to showcase Singapore's progress from a sleepy port to a major financial player.
The European Union and World Bank on Wednesday urged the government to allow the activists into the country, saying the move by Singapore was a breach of an earlier agreement.