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The International Monetary Fund has waded into the debate over Scottish independence, saying that a Yes vote in next week’s referendum could lead to market turbulence.

“The main immediate effect is likely to be uncertainty over the transition to potentially new and different monetary, financial and fiscal frameworks in Scotland,” William Murray, an IMF spokesman, told reporters.

“While this uncertainty could lead to negative market reactions in the short term, longer-term effects would depend on the decisions being made during the transition.”

His comments highlight the questions over which currency an independent Scotland would use, the regulation of its banks, and its budget position after negotiations to separate from the UK.

Recent opinion polls have indicated that next Thursday’s vote will be very close. Economic officials in Washington appear to have only just woken up to the real possibility of a Yes vote – having assumed it was unlikely. They point to the risk of a financial shock and resulting uncertainty that might hurt investment on both sides of the border.

“A Yes vote would raise a number of important and complicated issues that would have to be negotiated,” said Mr Murray.

He said the IMF had no position on how Scotland should vote. “There is a political process under way and I really don’t want to comment on the political process itself,” he said.

One of many issues a newly independent Scotland would have to resolve is its membership of the IMF. As a new country, Scotland would first have to apply to join, in order to gain the currency backstop the IMF provides.

At present, the UK has its own executive director at the IMF, and is one of the top five voting powers. It has 4.29 per cent of the total IMF vote – the same as France.

With a population of 5.3m, an independent Scotland would be too small to have its own executive director. It might seek to form a constituency with the rump UK, or else join another European constituency.

The rump UK would initially retain all of its voting power and its executive directorship. In future IMF negotiations, however, it would probably be too small to keep them. Large developing nations, such as India and Brazil, do not have their own directorships and regard European countries as massively over-represented at the IMF.

Once the rump UK’s voting power was adjusted to reflect its reduced population and economic weight, it would likely end up with less voting power than France, and join the ranks of second-tier European countries such as Italy that have to share an executive directorship as part of a constituency.

Copyright The Financial Times Limited 2019. All rights reserved.

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