WASHINGTON: Finance chiefs from around the globe gave the United States until year-end to ratify long-delayed reforms to the International Monetary Fund and threatened to move forward without it if it fails to do so.
The inability to proceed with giving emerging markets a more powerful voice at the IMF and shoring up the lender’s resources appeared the most contentious issue for officials from the Group of 20 leading economies and the representatives for all IMF member nations who met with them.
In a final communique, G20 finance ministers and central bankers said they were “deeply disappointed” with the delay. “I take this opportunity to urge the United States to implement these reforms as a matter of urgency,” Australian Treasurer Joe Hockey told reporters on the sidelines of the IMF-World Bank spring meetings.
The reforms would double the Fund’s resources and hand more IMF voting power to countries like the so-called BRICS - Brazil, Russia, India, China and South Africa. The US Congress has refused to sign off on the overhaul, which was agreed to in 2010, and the failure overshadowed even the crisis in Ukraine and the spillover effects of ultra easy monetary policies in advanced economies in the discussions.
Some Republicans have complained the changes would cost too much at a time Washington was running big budget deficits. The reforms also ran afoul of a growing isolationist trend among the party’s influential Tea Party wing. If Washington does not ratify the reforms this year, the G20 advanced and emerging economies said they would ask the IMF to develop possible next steps.
A source said Brazil had pushed for a harder line. It wanted to require the Fund to begin work now to determine options to be implemented if the United States failed to act, a notion that was floated in an early draft of the communique. “The end of the year for me is the final limit,” Guido Mantega, the Brazilian finance minister, said later through a translator. “Four years waiting for me is just too much.”
There are a handful of ad hoc measures officials can take to achieve at least some of the governance overhaul for the global lender without formal US approval. But Singaporean Finance Minister Tharman Shanmugaratnam, who is head of the IMF’s policy committee, said it was too early to talk about alternatives.
“We have every reason to think the 2010 reforms will be passed by the US,” he said, adding that a failure to pass them would affect the Fund’s credibility and effectiveness because, for now, it was relying on borrowed resources.
Earlier on Friday, Russian Finance Minister Anton Siluanov said developing nations may demand changes to the IMF’s emergency borrowing mechanism if the United States does not approve the overhaul. Still, giving the Americans until year-end puts the deadline beyond US midterm elections in November, and some officials said the US Congress would find it easier acting then. US Treasury Secretary Jack Lew said the Obama administration would do its best to push IMF quota reforms through the US Congress this year. Reuters