President Barack Obama proposed yesterday a budget-neutral increase in US funding to the International Monetary Fund that could end the impasse over IMF reform agreed three years ago.
In its 2014 fiscal year budget proposal to Congress, the Obama Administration said the cost of the increase in the US IMF quota would be offset by a reduction in the US contribution to IMF credit lines.
The 2010 IMF reform, aimed at both increasing the Fund’s lending resources and giving rising economic powers like China a greater role, required the US to put another $ 63 billion into the institution.
As the IMF’s largest quota holder — essentially largest shareholder — the reform needs US participation to be finalised.
To take effect, the reform need approval of 113 of the Fund’s 188 members, representing 85 per cent of the board’s voting rights. The US holds a virtual veto with its 16.7 per cent voting rights.
But until now resistance in Congress to giving more money to the Fund has held up the reform.
According to the new plan in the Obama budget, the US would essentially shift $ 63 billion from its contribution to the IMF’s New Arrangements to Borrow, a standing set of credit lines, to be used for the quota increase.
“The 2010 agreement results in no overall change in US financial participation in the IMF, while preserving US veto power and restoring the primacy of the IMF’s quota-based capital structure in which the United States has the largest share,” said the budget.
In talks a week ago in Washington, Treasury Secretary Jacob Lew and IMF Managing Director Christine Lagarde discussed the US commitment to implementing the IMF’s 2010 quota and Governance Reform.
According to a Treasury statement, the two talked about “the Treasury Department’s continued work with Congress to get quota legislation completed as soon as possible.”
The Democratic Obama Administration’s budget was expected to have little chance of approval in the bitterly divided Congress, where opposition Republicans control the House of Representatives.