The International Monetary Fund is running out of patience with the United States, its largest shareholder, whose intransigence is blocking an overhaul that would double the emergency lender’s resources.
Finance ministers and central bank governors from the IMF’s 188 member countries were unusually critical of the U.S. on the weekend.
The fund said the U.S. had until the end of the year to sign off on governance changes that have languished since 2010. If the deadline is missed, the IMF’s members said they would move forward without the U.S., which has dominated the Washington-based fund since its creation at the end of the Second World War.
“Progress on the IMF quota and governance reforms is crucial to maintain the fund's legitimacy across the membership,” Rodrigo Vergara, governor of Chile’s central bank, said in a statement prepared for the meeting of the IMF’s steering committee on Saturday. “We share the frustration that has been expressed by the membership from the current situation of stalemate.”
At issue is the global community’s efforts to align the IMF’s power structure to match changes in the distribution of strength in the global economy. Each country is assigned shares, or quota, to match its contribution to the world’s gross domestic product. The 2010 changes -- which, ironically, were prompted by President Barack Obama -- would give more clout to countries such as China and India and reduce the influence of some European nations whose relative share of global GDP has shrunk over time.
The U.S. would remain the IMF’s dominant member. It would retain more than 17 per cent of total shares -- which gives the U.S. veto power because approval of members representing 85 per cent of shares is required to approve major decisions. The next closest would be Japan and China, each of which would hold about 6.4 per cent of total quota.
Yet the governance overhaul also requires increased contributions to the fund’s permanent resources. The contributions are akin to insurance, as countries would only lose money if the IMF’s loans to troubled countries went unpaid.
Most legislatures approved the increased financial commitments to the IMF long ago. Mr. Obama, however, has failed repeatedly to muster enough votes in the U.S. Congress to pass the measure. Republican leaders in the House of Representatives and the Senate characterize the Obama administration’s request as akin to asking American taxpayers to bail out troubled countries such as Greece and Portugal.
“The implementation of the 2010 reforms remains our highest priority and we urge the United States to ratify these reforms at the earliest opportunity,” the IMF steering committee, called the International Monetary and Financial Committee, said in a statement at the end of its meeting.
The IMF’s members have expressed dismay with the U.S. political system before. The shift on the weekend was a threat to move forward without its traditional leader, despite the U.S.’s veto power. Finance ministers and central bank governors from the Group of 20 made a similar statement on Friday. Canadian Finance Ministers Joe Oliver expressed his disappointment with the U.S. progress.
“The IMF cannot remain paralyzed and postpone its commitments to reform,” Brazilian Finance Minister Guido Mantega said in his statement to the IMF steering committee. “Alternatives to move forward with the reforms must be found whilst the major shareholder does not solve its political problems.”
The smaller members of the IMF and the G20 resisted pushing the U.S. too hard, however. Officials pointedly stopped short of saying how they would advance the governance changes without the approval of the U.S. Congress.
“Plan A is going to be explored until the end and in depth,” Christine Lagarde, the IMF’s managing director, said a press conference Saturday. “If plan A doesn’t work, we’ll look at Plan B.”
A year-end deadline could provide a window for the Obama administration win legislative approval. Midterm elections in early November will be followed by a “lame duck” session of Congress before a new slate of lawmakers begins work in 2015. That could lessen the partisan urge of the IMF’s opponents in Congress to oppose the Mr. Obama.
“There is important bipartisan support for taking action,” U.S. Treasury Secretary Jacob Lew said on the weekend. “We will continue to work actively with Congress to enact the necessary legislation this year.”Report Typo/Error