The head of the International Monetary Fund (IMF), Kristalina Georgieva, has endorsed reforms that could potentially enhance Beijing's voting power within the fund. Georgieva, in an interview with the Financial Times on Tuesday, emphasized the need for the IMF to better reflect changes in the global economy, including China's economic rise over the past decade. She expressed optimism about the changes in voting power and pointed out how the fund had managed to mobilize and overcome differences in views multiple times since COVID-19.
Traditionally, each IMF member country has a quota based on its position in the world economy. This quota determines its contributions to the fund as well as its voting weight within the institution and access to emergency financing. Currently, despite China's larger share of global gross domestic product, its quota is less than Japan's. The IMF's board of governors conducts quota reviews at least every five years. The last time it agreed to changes was in 2010, and since then, China's economy has grown significantly.
On the same day, the IMF warned that growing geopolitical fragmentation since the invasion of Ukraine has adversely affected commodity markets and could slow down the transition to renewable energy. The fund noted that new trade restrictions on commodities have doubled since 2021, with low-income countries bearing most of the costs.
In a blog post accompanying a chapter from the fund's upcoming World Economic Outlook (WEO) report, IMF economists wrote that demand for minerals is set to rise severalfold in the coming years to achieve net-zero-carbon emission targets. However, they cautioned that economically viable deposits are concentrated in just a few countries and fragmented markets could complicate matters.
The IMF further stated that further geopolitical fragmentation could lead to "turmoil" in commodity markets, causing long-term economic losses of around 0.3 percent of the global economic outlook. Losses in low-income and vulnerable countries would be even higher, reaching around 1.2 percent of gross domestic product, on average.
The IMF economists estimated that severe trade disruptions could lower investment in renewable energy and electric vehicles by as much as 30 percent by the year 2030, leading to a slower mitigation of climate change. The IMF called for greater cooperation to mitigate the risks of commodity market fragmentation on the energy transition and urged for efforts to ensure the unhindered flow of food and minimize the threat of food insecurity in low-income countries. They also called for multilateral efforts to establish a "green corridor," to maintain the flow of critical minerals.
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