Russian president calls for radical overhaul of IMF

Russian president calls for radical overhaul of IMF

Russian president calls for radical overhaul of IMF

Russia’s President Vladimir Putin says the voting system of the IMF to determine policy should be changed to enhance the role of developing countries, with new weight given to the so-called BRICS. AFP photo

Russia will use its G-20 presidency for a radical overhaul of the International Monetary Fund and changes to its voting system to give developing economies a stronger voice, President Vladimir Putin has said in an interview with Russian state news agency RIA Novosti.

“The IMF frequently fails to keep up with the rapidly changing situation in global finance – first and foremost, in making effective and timely decisions,” Putin said on June 13, adding that the decisions’ “implementation leaves much to be desired as well.”

Russia currently holds the rotating presidency of the G-20, a formal grouping of the world’s 20 most powerful economies, and will lead the G-8, a group of the world’s eight richest countries, in 2014.

Putin did not call for the outright dissolution of the IMF, but argued that the organization must adjust to current economic realities, noting that it was time to consider the issue of its “overall reorganization, the report said.

In particular, he said that “the voting system used at the IMF to determine policy should be changed to enhance the role of developing countries, with new weight given to the so-called BRICS group of Brazil, Russia, India, China and South Africa.”

IMF also provides expertise like it did in eurozone sovereign debt crisis. Advice from the IMF was widely sought by Russian officials when the country was making its transition to a market economy in the 1990s.

Rio Novosti said “Putin acknowledged that reforming the IMF would not be easy, but said Russia would attempt to negotiate some compromises and mutually acceptable solutions ahead of September’s G-20 Summit in St. Petersburg.”

Criticisms of EU welfare

Putin sees the main difference between social welfare in Russia and in European countries, which he criticized for losing control of their economies and allowing, is the rise of a dependency mentality, according to the interview.

“Europe’s problem is not the welfare state as such, but inefficiency,” Putin said.

“While a modern state must honor its obligation to take care of its population and ensure its social protection or face the risk of collapse, European countries have been living beyond their means” and are now witnessing the rise of a dependency mentality that endangers not only the economy but the moral foundation of society. It is no secret that many citizens of less developed countries come to Europe specifically to live on social welfare,” he said.

However, the report said Putin praised Russia’s low unemployment and real wage growth, saying that these, plus the growth of consumer spending and bank lending, are the basic factors stimulating the country’s economy. “We made our choice long ago. We will not renounce our social obligations,” Putin said of the Russian state.

“Putin did not address either the hidden fees that permeate nominally free services like healthcare and public education or the criticism leveled at his push for higher social spending, which some economists say is possible only as long as the country’s budget is propped up by high oil prices,” the report said.

As in many European countries, the number of people in Russia dependent on social handouts is rising, while the working population is contracting, according to the World Bank. Russia’s working-age population is expected to shrink by one million people a year until 2017, the World Bank said in February, the report noted.