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US Congress closes out year without passing IMF reform
[WASHINGTON] The US Congress is preparing to leave town for the holidays without passing reforms to give emerging markets greater say at the International Monetary Fund, a step the Obama administration has warned could undermine Washington's international influence.
The White House signed off on the reforms in 2010, but US lawmakers need to back changes in how the IMF is funded before they can be put into place, given Washington's position as a controlling shareholder in the global lender.
But a must-pass US$1.1 trillion (S$1.44 billion) US spending bill unveiled late on Tuesday omits the IMF voting reform provision, dooming prospects that it will get passed by a year-end deadline.
Finance chiefs from around the world had given the United States until Jan. 1 to ratify the reforms, and have threatened to move forward without it if it fails to do so.
The changes would double the fund's resources and hand more IMF voting power to countries such as Brazil, Russia, India, China and South Africa, also known as BRICS. It would also revamp the IMF's board to reduce dominance of Western Europe. "Without these reforms, emerging economies may well look outside the IMF and the international economic system that we helped design," U.S. Treasury Undersecretary Nathan Sheets said last week.
Some outside observers believe the lack of reforms was the impetus behind the decision of the BRICS nations to launch their own currency reserve pool and development bank earlier this year, intended as a challenge to Western dominance in global financial institutions.
China also launched a proposed US$50 billion Asian Infrastructure Investment Bank, seen as a direct rival to the Western-dominated World Bank and Asian Development Bank.
Twice this year, BRICS nations threatened to veto a renewal of the IMF's crisis funds as a sign of their displeasure over the lack of reforms, according to several sources close to the IMF board.
The crisis fund, known as the New Arrangements to Borrow, was meant as a temporary credit line. But the IMF has been forced to rely more heavily on the NAB and bilateral lending to fund bail-outs of countries like Ukraine and Jamaica while it waits for US ratification of the reforms, which would double its main accounts.
Some Republicans have complained the IMF changes would cost too much at a time of big budget deficits in Washington. They are also critical of how efficiently the IMF was helping struggling economies in Europe and the risks attached to billion-dollar IMF loans to countries like Greece.
The Obama administration last made a big public push to include the IMF reforms in a broader funding package for Ukraine in March, but US Senate Democrats dropped the language to ensure smooth passage of the bill.
This time around, the administration appears to have run a quieter campaign, meeting numerous times with lawmakers on Capitol Hill over the past few months, according to a source familiar with the discussions who was not authorized to speak publicly. Sheets and US Treasury Secretary Jack Lew also brought up the IMF issue during meetings with lawmakers, the source said.
But three congressional aides, who requested anonymity, said the administration had not mounted a forceful push. "They haven't really put their shoulder into it, at all, in the last nine months," said one source familiar with IMF legislative issues.