US proves stumbling block in IMF reforms

| Updated on: Aug 24, 2012

After urging the IMF to reform, the United States has been dragging its heavy feet and blocking, in fact, the proposals aimed at giving emerging economies more say in the global lender.

The US, by far the biggest stakeholder in the 188-nation International Monetary Fund, is the only member of the Group of Eight that has yet to ratify a quota hike that would double its permanent resources to about $767 billion and executive board reforms that would strengthen the role of emerging economies.

Among the Group of 20 major economies, only Argentina, which has a troubled history with the IMF, has shown the same reluctance to commit.

But the US standstill is critical: without the support of its 16.7 per cent voting rights, the 2010 governance and quota reforms are dead in the water.

Operating in high gear amid the Euro Zone debt crisis, the IMF still hopes, officially, to meet a deadline for the approval of the reforms this year.

“My objective is certainly to get as close as possible to the finishing line,” IMF managing director Christine Lagarde said in late July, while admitting the fund was “still short” of approving the proposed governance reform.

According to an IMF update released on Monday, the governance reform has been ratified by 102 countries representing 65.9 per cent of voting power, well shy of the 85 per cent needed to rebalance the board to better reflect today’s global economy.

Currently China, the second-largest economy, holds only 3.8 per cent of the voting power at the Washington-based financial institution, not much more than Italy’s 3.1 per cent weight. Under the reform, China’s voice would nearly double to 6.0 per cent.

The stumbling block, the United States, was a leading champion of IMF rebalancing adopted at the G20 summit in Seoul, calling for multilateralism and softly criticising European countries’ overrepresentation on the board.

Though President Barack Obama has backed the reforms, which maintain the US veto power over major decisions at the IMF, they require approval by Congress.

Published on March 12, 2018

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