The G20 leading economies on Friday discussed ways to raise emerging nations’ voting rights at the IMF as part of an effort to move past US foot-dragging on reforms to the institution, but they failed to reach an agreement.
The IMF’s member nations agreed in 2010 to give more voting power to nations like China and India, double the Fund’s resources and reduce the dominance of Western Europe on its 24-member board.
However, US President Barack Obama’s administration, which supports the reforms, has been unable to persuade the US Congress to pass funding changes necessary for the agreement. The US can block the IMF reforms because it holds a controlling share of votes.
Photo: AFP
To get around the US, the IMF’s board had proposed one “interim” plan to raise the voting rights of some emerging nations under an ad hoc increase without touching US veto power.
That plan was discussed, along with another proposal to push through the voting reforms without doubling the Fund’s resources, which would see the loss of the US veto, according to officials in attendance.
The ad hoc interim plan made it into a draft communique by the G20 finance ministers and central bank governors, but it was dropped from the final version after officials failed to come to an agreement.
“We call on the IMF executive board to pursue an interim solution that will meaningfully converge quota shares as soon as and to the extent possible to the levels agreed under the [2010] review,” the G20 said in its final communique.
Even under the ad hoc plan, nations like China would only get a small bump up in their shares, as all reallocations must allow the US to keep at least 15 percent of the votes.
The interim proposal also would not resolve the IMF’s financial crunch, as it increasingly relies on temporary arrangements approved during the height of the 2007-2009 financial crisis to fund major loan programs in nations like Greece and Ukraine.
Some other nations, including Brazil and Russia, had also pushed a second proposal, known as “de-linking,” in which the IMF board would detach the doubling of resources from changes to the board structure, and the US would be asked to temporarily give up its veto power until it ratified the reforms.
“We’re in favor of the more strict option, de-linking,” Russian Minister of Financne Anton Siluanov told reporters during the spring meetings of the IMF and World Bank in Washington.
“Because we see difficulties in getting [the quota reforms] through Congress for the third year, so we don’t see any basis for optimism.”
However, the US would have to agree to give up its voting shares, which most Fund officials admitted was unlikely.
The G20 ministers said they remained “deeply disappointed” the 2010 reforms had not been approved, and urged the US to ratify them as soon as possible.
US Secretary of the Treasury Jack Lew on Friday said that the US “will continue to press Congress to approve these much-needed reforms as soon as possible.”
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