US Leaders Urge Congress to Ratify IMF Voting Reforms
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The Obama administration has asked U.S. lawmakers to approve an increase in the United States’ contribution to the International Monetary Fund, as well as changes to the voting process within the Fund that will boost the influence of emerging economies like China and Brazil in the global financial institution.
The Treasury Department on Tuesday sought Congressional permission to approve a 2010 International Monetary Fund reform package that would change the distribution of voting power within the organisation.
The Obama administration has asked U.S. lawmakers to approve an increase in the United States’ contribution to the International Monetary Fund, as well as changes to the voting process within the Fund that will boost the influence of emerging economies like China and Brazil in the global financial institution.
The Treasury Department on Tuesday sought Congressional permission to approve a 2010 International Monetary Fund reform package that would change the distribution of voting power within the organisation.
Voting rights within the organisation are determined by IMF contributions, known as quotas, and the United States as the IMF’s largest stakeholder has effective veto power over the historic deal that was meant to have been approved by all IMF member countries in October, but was delayed by the U.S. presidential elections.
The U.S. request would not require any new funds to be appropriated by Congress because it simply shifts some $65 billion from one IMF account to another, explained a Senate Democratic aide. Thus, should the request be rejected, the $65 billion will remained locked in the IMF crisis fund known as the New Arrangements to Borrow until the end of the year.
But the reforms, if approved, will give emerging powers greater voting clout in the organisation while displacing Western Europe’s influence in IMF affairs.
China and Brazil have long contended that the IMF’s existing voting system unfairly benefits Europe and the United States, which dominated the IMF since its founding after the World War Two.
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Sources told Reuters the Treasury is concerned that further delays by Congress in approving the IMF reforms could damage the U.S.’s credibility and influence at the Washington-based financial institution.
In a letter sent to congressional leaders on Tuesday, some 19 signatories – which includes ex-Treasury Secretaries Henry Paulson and Larry Summers, former Federal Reserve Chairman Alan Greenspan and former World Bank president Robert Zoellick – urged Congress to approve the funding request “because of the returns it brings to our nation going forward.”
They wrote:
[quote] A stronger IMF, driven by U.S. leadership, supports U.S. and global interests. We therefore urge the Congress to continue its longstanding, bipartisan support of the International Monetary Fund for our self-interest and for the good of the global system. [/quote]
“Continued support will ensure the U.S.’ ability to leverage its economic development dollars and ensure its on-going influence on the IMF to prioritise areas we deem critical, such as improving governance, privatisation, and strengthened financial systems,” they said.
But the plan faces an uphill battle for passage in a tense U.S. budget environment marked by the launch of $85 billion in automatic spending cuts on March 1 that hit both the U.S. military and domestic programs hard.
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