ARTICLE 2 (Part 1)

L. L. FITUNI

Doctor of Economics

Institute of Africa, Russian Academy of Sciences

Key words: international monetary and credit relations, capital flows, IMF quotas, BRICS, low-income countries, external debt, global governance

In the years that have passed since the countries of Asia, Africa and Latin America gained independence, their finances have undergone a long evolution - from rudimentary structures left by the metropolises to full-fledged complex modern systems of varying degrees of stability and efficiency. Over the past 10 to 15 years, there has been an accelerated differentiation of developing countries in terms of their financial viability, growth trends, and the ability of national finances to develop themselves. At the same time, the processes of consolidating the financial power of developing countries are gaining momentum, and they are justifiably insisting that their interests should be more taken into account when reforming the global monetary and financial systems.

The current global financial and economic crisis has highlighted the changing position of developing countries in global finance and international monetary and credit relations. On the one hand, over the past decade and a half, the global "financial importance" of the leaders of catch - up development-China, India, Brazil, Russia, etc. - has increased, and the national finances of developing countries as a whole have been somewhat strengthened and consolidated. ¹ In emerging markets, especially in Asia, private savings rates have been very high in recent years. The IMF estimates that they will remain above the global average in the near and medium term, although they are likely to decrease slightly.²

On the other hand, a significant number of young countries are still less integrated into global monetary and financial relations due to their continuing underdevelopment. Such a lag in financial development and disconnection from particularly risky segments of the global financial market have played the role of a natural barrier to the spread of the worst manifestations of the global crisis to developing countries. As a result, unlike in the developed world, the financial situation in Asia, Africa and Latin America was much less catastrophic in the current crisis. And in some regions, such as Africa, even-quite favorable (as much as it is generally possible in the context of global financial cataclysms).

The unexpected "immunity" of developing countries to the virus of the crisis is explained by two different vectors of development of their finances in the last decade and a half: the consolidation of their financial positions and at the same time deepening financial differentiation.

DIFFERENTIATION, CLASSIFICATION, AND METHODOLOGIES

Issues of developing generally applicable methods for grouping and classifying world states, in terms of the state of their monetary and financial systems,

For the beginning, see: Fituni L. L. Differentiation of developing countries and the new architecture of the world economy (voprosy teorii). Article 1 / / Asia and Africa today. 2012, N 10. pp. 9-18.

Such influential international organizations as the International Monetary Fund (IMF), the World Bank (WB), and regional international financial institutions - the African and Asian Development Banks (AfDB and ADB, respectively) - are in the spotlight. They, by virtue of their mandate and competence, develop the most sound methodologies that allow differentiating Member States, primarily on the basis of monetary and financial criteria.

Both the IMF, the World Bank, and their regional counterparts, being organizations of the UN family, are forced to start from the most general grouping criteria. The fundamental principle remains the integration of the most general macroeconomic aggregative indicators and financial indicators themselves. The main classification criterion for all UN structures remains the basic dichotomy - "developed/developing" countries, which underlies almost all modern methodologies, supplemented in the analysis of finance by a more detailed division of these two country megagroups according to a limited number of geographical and analytical criteria. Different organizations often enter their own names for the resulting subgroups.

When identifying these subgroups, major global financial institutions traditionally differentiate developing countries according to three classification criteria:: 1) regional and geographical; 2) in terms of income/development;3) in terms of their creditworthiness and solvency. However, in practical terms, the use of all three classification features has never been very strict. Even in cases where we are talking about a seemingly" self-evident " parameter, such as the regional-geographical principle of grouping.

The IMF identifies a group of 35 advanced economies, including, in addition to the United States, 27 EU members, Japan, Canada, Norway, Switzerland, Australia, Iceland, Israel, as well as newly industrialized countries (NIS-Hong Kong, South Korea, Taiwan, Singapore). All other countries are assigned to the Emerging markets and developing countries mega-group (151 countries), with regional breakdown into Central and Eastern Europe (CEE); Commonwealth of Independent States (CIS); developing Asia; Latin America and the Caribbean (LAC); Middle East and North Africa (MENA); Sub-Saharan Africa (SSA). Interestingly, IMF analysts include Mongolia and Georgia in the CIS group, which are not formally part of the Commonwealth.³

The financial differentiation of developing countries that we are interested in in the IMF methodology is based on so - called analytical criteria (see Table 1). The latter reflect the structure of countries ' export revenues and other external revenues; the difference between countries that are net creditors and net debtors. In addition, for net debtor countries, additional criteria are used to differentiate between sources of external financing and debt service status.

The analytical criterion "by sources of export income" is divided into the categories "fuel" (International Standard Trade Classification-MCC 3) and "goods other than fuel", which distinguishes" primary products other than fuel " (MCC 0, 1, 2, 4 and 68). Countries fall into one of these categories when their main source of export revenue accounts for more than 50% of total exports, on average, from 2006 ^to 2010.4 By and large, this is a modern and politically correct synonym for monocultural exports.

The classification according to financial criteria is divided into: countries - net creditors, countries-net debtors and poor countries with a high level of debt (HIPC). Net debtors are countries where the total amount of their external current account balances from 1972 (or the earliest year for which data are available) to 2010 is negative. Net debtor countries are further subdivided on the basis of two additional financial criteria: "official external financing" ("official aid") and "debt service status". Between 2006 and 2010, 40 countries had outstanding external debt or entered into debt reissue agreements with official creditors or commercial banks. This group of Countries is called "countries that had overdue debt and/or countries that reissued debt between 2006 and 2010".

The IMF places countries in the "official external financing" group if 66% or more of their total debt, on average from 2006 to 2010, was financed by official external creditors. The HIPC group includes countries that, according to the IMF and the World Bank, meet or have met the criteria for participating in their debt initiative, known as the HIPC Initiative, which aims to reduce the external debt burden of all HIPC-eligible countries to an "economically acceptable" level in a fairly short period of time. Many of these countries have already benefited from debt relief and completed their participation in the initiative.⁵

If we use only the above-mentioned IMF classification criteria, the following picture emerges (see Table 1). 2) monetary and financial differentiation of emerging markets and emerging economies (FR and RE).

The data shown in table 2 show that, from the point of view of the financial situation, the International Monetary Fund, in fact, strictly typologizes-

Table 1

Classification table of differentiation of countries by level of development (according to the criteria and terminology of the IMF, World Bank, United Nations Development Program-UNDP)

* Percentile - the value that a given random variable does not exceed with a fixed probability, after which the value of this observed value drops sharply; in other words, in this case, by definition, 75% of HDI values (and, as a result, the number of countries) have a result "worse", and 25% - "better" than the threshold values.

Source: IMF Working paper N 11/31. Washington, 2011. P. 19.

cesky divides two large groups of developing countries: 1) countries experiencing acute monetary and financial problems, primarily expressed in the lack of foreign exchange resources and being in debt dependence, and 2) developing countries that are prosperous from this point of view.

If we take (with a very high degree of conditionality) the net external (debt) position as the criterion for dividing the countries of Asia, Africa and Latin America into "prosperous" and "dysfunctional", it turns out that the number of the former is small-depending on the year of calculation-about 30, which is approximately equal to the number of developed countries that include some States are credited, so to speak, in advance, for ease of generalization.

The" disadvantaged group " is almost four times as large as its more successful counterparts, and today it includes 121 States. In passing, we note that a number of countries that are not members of the IMF, such as Cuba, North Korea, and some island jurisdictions in the Pacific and Caribbean, are not included in these calculations. So are Somalia, the Marshall Islands, and the Federated States of Micronesia, which formally joined the IMF but do not provide statistics.

The described division of the liberated countries into financially wealthy and living in debt has existed for many decades. The financial well-being of a smaller part of developing countries is usually based on natural rents associated with the extraction of resources in demand on the world market. Since the middle of the last century, the oil-producing countries of the Middle East and, to a lesser extent, Latin America have been able to solve at least some of their current socio-economic problems at the expense of super-revenues from hydrocarbon exports. Over time, some of these countries have become not just net exporters of capital, but also major international investors, including in the economies of developed countries.

On the other hand, the presence of huge reserves of fuel and raw materials or mineral resources does not automatically guarantee the financial stability of the economies of these countries. The best example in this respect is the experience of our own country. Despite the presence of the richest reserves of mineral and fuel resources and a multi-industry developed economy, the USSR in the second half of the 1980s began to experience acute problems with filling the budget, and in the 1990s. Russia found itself in a state of acute financial and debt crisis.

Table 2

Differentiation of developing countries by currency (exports) and financial (debt) criteria of the IMF

Continuation of table 2

* The main source of external financing for the net debtor country concerned is "official financing" (official development assistance).

** The IMF includes Mongolia and Georgia, which are not legally part of the Commonwealth, in the CIS group.

Source: compiled by the author using the IMF methodology for 2013.

Even today, fast-growing multi-industry and resource-rich economies such as Brazil and South Africa are among the net debtors. However, the net debtor position means only a negative balance of the balance of financial liabilities and claims. A country can aggressively invest abroad and provide external loans, but at the same time attract external capital in both production and loan forms. At the beginning of the XXI century, the BRICS countries (Brazil, Russia, India, China, South Africa), Mexico, Turkey and some others were among the developing countries actively investing in developed economies. Moreover, some of the developing countries, as noted, managed to avoid the severe consequences of the current global economic crisis and, in fact, became an important factor in keeping the Old World economies afloat and maintaining global economic growth.

In 2012, the world economy passed a milestone that, according to World Bank experts, marked a qualitative shift in the long process of shifting the balance of power from developed countries to middle-income countries and poorer developing countries. The total value of exports within the group of developing countries (South-South trade) exceeded that of South-North trade. In 2002, developing countries sold only 40% of their total exports (by value) to each other. The rest went to the countries of the "golden billion". In 2010, the total volume of exported goods and services was divided in half. In 2012, developed countries bought about 5% less goods from developing countries than developing countries bought from each other.⁶

The global financial crisis has left many banks in advanced economies teetering on the brink of collapse. At the same time, many emerging market banks have soared up the global rankings. China's ICBC Bank is now the world's largest in terms of

According to the report, seven other banks from China, Brazil and Russia were included in the list of top 25 banking financial institutions of the World Economic Forum. Note that just a few years ago, in 2005, not a single bank from the emerging markets group was included in the list of the top 25 largest institutions by market capitalization.

A relatively new phenomenon is the aggressive expansion of banking institutions, primarily in the BRICS countries, but also in a number of other countries - Turkey, Mexico, etc. - beyond the borders of national jurisdictions. By the beginning of 2012, credit institutions in almost 70 countries that are not classified by the IMF as highly developed economies were banking in other countries. In 1995, there were only 45 of them. According to the latest available aggregated data (as of 2009), South Africa, Russia, Turkey and Brazil were the most active in this respect, with 31, 29, 21 and 17 foreign banks owned, respectively. China and India were less active, which, however, largely reflected not the weakness of their financial institutions, but a different external strategy of the state and foreign economic priorities.⁷

If we try to distinguish the distinctive features of the banking expansion of developing countries in comparison with the credit institutions of developed countries, the following becomes noticeable. The banks of developed countries are focused on global expansion, while the banking business of emerging markets is currently expanding its position by entering small or relatively less developed countries in Asia, Africa and Latin America, mainly each in its own region.

A change in the balance of power in global finance and international monetary and credit relations in the context of a fair world economic order should lead to a change in the terms of representation of such countries in the IMF and the World Bank. Moreover, at present, an increasing share of programs to support the monetary and financial problems of countries around the world is carried out by attracting resources from countries such as China, Brazil, India, Russia, South Korea and oil-producing Arab states.

CONSOLIDATION OF BRICS FINANCIAL POSITIONS

The rise in emerging market economies, particularly in the BRICS countries, is changing the geography of the world's leading economic centers. Cooperation among the BRICS countries contributes to the balance and improvement of the global trading system, currency system and price formation system for consumer goods, and has a profound impact on the global level. The members of the association are a key geopolitical force for changing the global financial architecture, modernizing and fairly redistributing the rights and obligations of members of the international community in the field of finance.

The BRICS countries are also considering establishing a new Development Bank to mobilize resources for infrastructure and sustainable development projects in the BRICS countries, as well as in other emerging and developing countries. Such a Bank would complement the existing efforts of international and regional financial institutions aimed at global growth and development. The Fourth BRICS Summit (India, 2012) instructed finance ministers to study the feasibility and viability of such an initiative, establish a joint working group to further develop it, and report on it.

The main starting point of the BRICS countries ' position is to recognize the importance of the global financial architecture for maintaining the stability and integrity of the global monetary and financial system. To achieve this goal, they are working to create a more representative international financial system, in which developing countries will have a greater voice and representation, and to create and improve a fair system of international monetary and credit relations. A reformed global monetary and financial system, according to BRICS members, could serve the interests of all countries and support the development of emerging market and developing economies, since these economies, which have achieved large-scale growth, now make a significant contribution to the global recovery.⁸

The BRICS countries have repeatedly pointed out in various international forums that, as a result of the relatively faster economic growth of a number of developing and emerging market countries, their influence on the IMF's activities, determined by the size of their quotas and, consequently, the number of votes, has come into clear contradiction with the increased role of these States in the global economy.⁹

The Group of Five has repeatedly expressed concern about the slow progress of the reform of the IMF's quota and governance system, which its members see as urgently needed. What is very important is not only the size of quotas, but also a comprehensive revision of the quota calculation formula to better reflect the economic weight and strengthen the voice and representation of emerging and developing countries in the governance of the world's leading financial institutions as a whole.

The fact is that the IMF is organizationally similar to a mutual fund - only on a global scale. Uchas-

Table 3

Dynamics of changes in the share of groups of states and individual countries in the system of quotas and votes of the IMF (both in % of the total number)

Compiled by the author on the basis of official IMF data.

* 2006-before the first round of extraordinary quota increases in China, South Korea, Mexico, and Turkey.

** 2013-actual value as of February 3, 2013

*** 2015-projected value after completion of the 14th round of quota review and implementation of the 2010 quota, voting and governance reform conditions; excluding possible additional extraordinary changes.

its governance depends on the quota of the Member State. The latter determines the maximum amount of its financial commitment to the IMF and its number of votes, and also affects its access to funding from the IMF. Quotas are expressed in Special Drawing Rights (SDR), the IMF's unit of account (see Table 3).

The quota determines the number of votes available to a country when making a decision, but their shares in the total are not equal (see Table. 3), since a number of other factors are taken into account when determining the final number of votes. Such an indirect system of determining the real limits of influence on decision-making, thoughtfully borrowed in the 1940s. In the case of the US presidential election system, even additional contributions to the IMF by individual countries do not automatically lead to an identical strengthening of their position in the management of the fund. The size of quotas is reviewed every five years, and each time there are heated discussions around this issue and a secret struggle is being waged.

In December 2010 The Governing Council, the highest decision-making body in the IMF, has approved a package of Quota and Management Reforms for the Fund, and completed the 14th Overall Quota Review. After the approval of the state budget reform package-

It includes an amendment to the articles of agreement requiring the adoption of 3/5 IMF member States with 85% of the total vote) and its implementation will result in a 100% increase in aggregate quotas and a significant rebalancing of quota shares to better reflect the changing relative weights of IMF member States in the global economy. ¹⁰.

On 3 March 2011, a package of reforms came into force that strengthened the representation of fast-growing economies (many of which are emerging market countries) through special quota increases in 54 Member States and expanded the voting rights and participation of low-income countries by almost tripling the number of basic votes. Russia's quota increased from 2.49% to 2.71% and amounted to SDR 12,903. 7 in absolute terms.

According to Finance Minister A. G. Siluanov, the BRICS countries have formed a common opinion on the issue of reviewing quotas. There is another position - this is the position of European countries that are opposed to reducing their quota in favor of developing countries. In this regard, the Minister said that Russia will, in particular, strive to ensure that at the next G20 summit, in early September 2013, a decision is made on a new scheme for the formation of quotas and distribution of votes of the 188 countries of the world that are members of the International Monetary Fund.¹¹

BATTLE FOR VOTES AND QUOTAS

According to the decisions of the IMF's governing bodies, a new quota calculation formula should have been developed by 2013, taking into account the growing influence of developing countries in the global economy. Based on it, the 15th stage of quota review is expected to be held in 2014. Among other things, there were agreements to reduce the number of executive directors from developed countries by two positions, as well as countries ' agreement in principle to reduce the total size of new borrowing agreements in proportion to the relative increase in quotas.

The methodology and formula for calculating the quota itself is one of the stumbling blocks and confrontations in the IMF between BRICS and developed countries. The former do not like that the latter, taking advantage of the current dominant positions in decision-making, push through a more profitable methodology for them, introducing difficult-to-measure or subjectively determined variables into the formula. The press release published on January 30, 2013 and the Report of the working group on the revision of Formula ¹² show that this confrontation has not only not decreased, but, apparently (if you read between the lines of the diplomatic document), only increased.

Since 2008, the IMF quota calculation formula has consisted of four components: GDP (the weight in the general formula is 30% of nominal GDP at the current exchange rate, 20% of GDP at purchasing power parity, PPP), economic openness (30%), economic variability (15%), and the size of foreign exchange reserves countries (5%). A. G. Siluanov openly stated that developed countries "try to catch on to certain indicators, such as openness and variability, which, in our opinion, reflect to a lesser extent the essence and significance of certain countries in the global configuration"¹³.

The BRICS countries and a number of other countries have long expressed their fundamental objections to the so-called variability, calling for this indicator to be excluded from the formula, since it is not able to really reflect the role and weight of a particular country in the global economy. Discussions are also being held around the openness indicator, which allows small European economies to gain significant weight due to large volumes of trade, including within the EU, and the presence of large international financial centers nearby.

The IMF documents published at the beginning of 2013 regarding the use of these variables in the future generally state that there are different approaches to assessing the usefulness of maintaining their role in the final formula. Despite previous decisions, no new formula had been developed by the beginning of 2013. In its report, the IMF's Governing Executive Board noted that " significant progress has been made in identifying key elements that can serve as the basis for a final agreement on a new formula for calculating quotas." The main conclusion of the report was that " the discussions held by the Executive Board in the framework of the review served as important components of the agreement on a revised formula for calculating quotas, which will more accurately reflect the relative position of Member States in the global economy. The results of this comprehensive review of the quota formula will provide a solid basis for the Executive Board's decision on a new quota formula as it works on its 15th revision, with a view to reaching consensus on a reform package that can be supported as widely as possible."¹⁴

Although the European debt crisis has allowed the BRICS countries to demand more influence in the IMF, they still hold only about 11% of the votes in the fund. At the same time, the US share is 16.75%, which allows you to veto any significant decisions that require an 85% majority, and the UK and France still have more votes than any BRICS country. In other words, the United States, together with leading Western countries, has the ability to exercise control over the decision-making process in the IMF and direct its activities based on their own interests.

With coordinated action, developing countries can also avoid making decisions that displease them. However, achieving consistency across a large number of diverse countries is difficult.

According to the joint position of the BRICS countries, a dynamic reform process is necessary to ensure the legitimacy and effectiveness of the Fund. At the IMF's spring 2012 session, the Fund's members decided to increase its reserves by approximately $450 billion, after which the Fund's total lending capacity will exceed $800 billion. The largest additional investments were announced by three countries - Japan ($60 billion), Germany ($55 billion) and China ($43 billion). India, Russia, Brazil and South Africa agreed to provide $10 billion each. each one. However, the process of revising the formula for recalculating quotas of the participating countries is difficult.

Most representatives of rich countries, especially the United States, do everything possible to minimize losses in their positions. For them, it is particularly important to prevent the BRICS countries from practically increasing their role in the IMF, especially with regard to the real management of the Fund's activities. To do this, they are willing to make symbolic increases in quota shares and voting rights for the poorest and most resource-deprived developing countries, which can be negotiated with the help of "familiar arguments" on the eve of crucial votes, and also insist that one-time replenishment of the Fund should be disproportionately taken into account in the new formula for calculating votes and real influence in the management of the IMF^..

The current efforts to increase the IMF's lending resources will, in their view, be successful only if there is confidence that all of the Fund's member States are truly committed to implementing the 2010 reform in good faith. The BRICS countries are working with the international community to ensure that sufficient resources are mobilized to the IMF in a timely manner as the Fund continues its transition to better governance and to strengthen legitimacy. A special area of joint BRICS efforts is also to support measures to protect the voice and representation of the poorest countries in the IMF.

The BRICS countries are not entirely satisfied with the existing surveillance system and would like to make it more holistic and objective.

In addition to currency and debt issues, one of the leading issues on the BRICS joint global agenda is the issue of expanding the flow of financial resources for the development of emerging market economies and developing countries. One of the solutions to this problem is seen in the World Bank's increasing the priority of resource mobilization and meeting development financing needs, while reducing the cost of borrowing and introducing innovative credit instruments. The BRICS countries are seeking greater representation of developing countries in the governing bodies of the IMF and the World Bank, the introduction of "social elevators" for citizens of Asian, African and Latin American countries, and the rejection of the undemocratic, stagnant practice of appointing representatives of the United States and Western Europe to top positions in these institutions. According to the BRICS countries, the heads of the IMF and WB should be selected through an open process based on professional qualities, and the new leadership of the World Bank should commit to transforming the Bank into a multilateral institution that truly reflects the vision of all its members, including the formation of a governance structure that takes into account current economic and political realities. Furthermore, the nature of the Bank should evolve from an institution that primarily mediates between North and South to one that promotes equal partnership with all countries - a way to address development challenges and a means to overcome the outdated division between donors and recipients. ¹⁶

(The ending follows)

¹ For the content and interpretation of the term "developing countries", see: Fituni L. L. Differentiation of developing countries and the new architecture of the World economy. (Questions of theory). Article 1 / / Asia and Africa today. 2012. N 10. pp. 9-18.

² Overcoming high debt levels and sluggish growth. Prospects for the development of the world economy. October 2012. The IMF. New York, 2012, p. 50.

^{Matsenko I. B.} 3 Afrika: realizatsiya "tselei razvitiya millennia" [Africa: Implementation of the Millennium Development Goals]. 2012. N 8. p. 21-26; Overcoming high levels ... p. 192.

^{Fitupi L. L.} 4 Ekonomika Afrika: vyzovy poskrizisnogo razvitiya [African Economy: Challenges of Post-crisis Development]. 2010. N 9. P. 11; Overcoming high levels of debt ... p. 190.

⁵ For more information, see: Kovalchuk A. P. How the world helps Africa / / Asia and Africa Today. 2013. N 5. p. 9-17.

⁶ The Economist. L., 19 January, 2013. P. 72.

⁷ World Economic Forum. The Financial Development Report. 2012. Geneva. 2012. P. 47.

⁸ Delhi Declaration (adopted following the fourth BRICS Summit) - http://www.mid.ru/brics.nsf/WEBsamBric/lDB82FF3745 BA8FE 4425 79D5004778E6

^{Smyslov D. V.} 9 Reformation of the International Monetary Fund: Problems and solutions. Finance and Management / / Money and Credit. 2012, N 2. P. 33.

¹⁰ http://www.rbc.ru/fnews.open/20121013155737.shtml

¹¹ http://www.minfin.ru/ru/press/speech/index.php?pg4-5&id4 =17517

¹² Report of the Executive Board to the Board of Governors on the Outcome of the Quota Formula Review. IMF. Wash., 30 January, 2013.

¹³ http://www.minfin.ru/ru/press/speech/index.php?pg4-5&id4=17517

¹⁴ The IMF Executive Board reports on the revision of the quota formula. IMF Press Release No. 13/30 of January 30, 2013

¹⁵ http://www.imf.org/external/np/pp/eng/2013/013013.pdf

^{Abramova I. O.} 14 Perekhod k novoi ekonomicheskoi modeli mira i strany Afrika [Transition to a new economic model of the world and African countries]. 2012. N 2. P. 105.

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