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Sunday, June 26, 2016
- With just a month to go before an agreed deadline, the International Monetary Fund (IMF) warned on Tuesday that a push for more equitable voting shares among the organisation’s member states was still lagging.
The most notable absence among those to have ratified the reforms is the United States, one of the main proponents behind the proposals in the first place.
While the head of the IMF, Christine Lagarde, is urging “remaining countries to complete the necessary steps quickly”, it now appears clear that the necessary support will not be gathered by the time the IMF and the World Bank hold their annual joint fall meetings, in Tokyo in mid-October, as initially agreed.
According to the IMF, based here in Washington, these reforms are aimed specifically at “enhancing the voice and representation of emerging market and developing countries, including the poorest”, and are supposed to be formally agreed upon by January 2013 to be officially integrated the following year.
While the United States initially championed the changes – and, according to several inside observers, continues to do so – its formal backing requires a vote in the U.S. Congress. With the U.S. presidential campaign season now in full swing, President Barack Obama has made clear that he is not planning on putting the issue before a congressional vote.
“The (Obama) administration has no plan to move on this issue before the elections,” Jo Marie Griesgraber, executive director of the New Rules for Global Finance Coalition, an international network based here, told IPS.
“The open question is whether there will be action during the lame-duck session if Obama is re-elected,” she says, referring to the two and a half months between the early November election and the end of the current administration’s tenure.
However, the IMF also announced Tuesday that one key component of the reforms package has already surpassed the level of support needed, even without the United States. This would see a doubling of the IMF’s overall reserves to around 767 billion dollars, a change for which only 70 percent of IMF members’ support is required.
As of Monday, 73 percent of member countries, 124 of 188 nations, have now given their support for this provision, though not the United States.
“Other countries can go ahead and pay in their quotas,” Griesgraber says. “I don’t think the administration will act on this either until after election, but it could easily do so after whether Obama is re-elected or not.”
The broader issue, however, is a reform of the organisation’s “quota” system, which dictates how much money each individual country contributes to the Fund and, hence, how much voting power it has on Fund actions. This would also result in a shakeup of the IMF’s 24-member executive board, with an eye to giving developing countries, particularly several of the emerging economies but also poor countries, greater voice within the organisation.
While countries constituting 85 percent of the Fund’s voting power must ultimately support the proposed amendment to reform the executive board, by Monday only 105 countries, with 66 percent of voting power, had done so. At such a late date, then, such numbers clearly highlight the importance of the United States, which holds around 17 percent of all voting rights – a number that is actually set to rise if the current reforms are passed.
The current reforms push goes back to a 2010 meeting of the G20 in Seoul, where the IMF’s member countries agreed to revisit the Fund’s complex quotas formula. According to many analysts, such a move was already woefully late, reflecting an outdated schema of world power.
China, for instance, today the world’s second-largest economy, only has voting rights on par with Italy. Under the new setup, China’s weight within the Fund would effectively double, along with that of several other emerging economies, while the voting rights of several developed countries would be curtailed.
While the United States championed the reforms package and reportedly continues to work closely on its progress, the Group of 20 (G20) countries, which includes most of the main emerging economies, has since taken on the issue as a core cause, pledging to see through the reforms by the time of the fall meetings.
Indeed, ahead of the G20 summit in Mexico in late June, several G20 representatives promised to demand that movement be made on the IMF reforms, threatening even to withhold emergency additional funding for the ongoing IMF bailout of teetering European Union economies. Brazil spearheaded this call, but it was supported by China, India and Russia, as well as G20 host Mexico.
In the event, however, the crisis in the eurozone overwhelmed much of the IMF-related agenda – and nearly everything else – at the G20 summit.
Still, the U.S. election is not the only point of friction in moving forward on the full reforms package. Following the Fund’s first formal talks on the reforms, in July, an official summary noted the various country directors’ “wide range of views”.
“The IMF board itself is severely divided, with smaller EU countries that will lose out fighting bitterly to retain their seats and their votes,” Griesgraber says.
“Resistance is also coming from middle-income countries that have lost substantial shares of their votes – Nigeria, South Africa, Argentina, etc. – under the 2010 reforms.”
Meanwhile, many others have criticised the reforms package itself as ineffectual, warning that the deliberations over the proposals is diverting attention from a much broader debate over the Fund’s own changing role and future priorities.
“China’s one of the largest economies in the world, and what are we going to give them under this plan? Very little,” Mark Weisbrot, co-director of the Center for Economic and Policy Research, a think tank here in Washington, told IPS at the time of the July talks.
“These countries are being hit because of the mess in Europe – even China’s hurting. And the IMF is one of the three players making this mess. In that regard, these reforms won’t make any difference at all.”