The credibility of the United States is at risk if Congress fails to approve International Monetary Fund quota and governance reforms, Treasury Secretary Jacob Lew warned on Tuesday. For more than two years the US Congress has prevented the 2010 IMF reforms from taking effect.
Critically, we are seeking Congressional approval of the IMF quota and governance reforms, Lew told a hearing of the House of Representatives financial services committee, according to the prepared text. Our international credibility and influence are being threatened.
The US is the only member country with veto power over major IMF decisions. The reforms would give more weight to emerging-market powers, like China, and double the Fund's permanent financial resources.
That impasse has raised the ire of China and other countries which would benefit from a power structure more representative of the current global economy.
The proposed reforms will put the IMF's finances on more stable footing over the long term, help modernize the IMF's governance structure, and preserve America's strong leadership role in shaping the institution, Lew said.
Our continued failure to approve the IMF quota and governance reforms is causing other countries, including some of our allies, to question our commitment to the IMF and other multilateral institutions that we worked to create and that advance important US and global economic and security interests.
Lew noted that the reform delay was pushing emerging-market powers to create their own parallel multilateral financial institutions. The BRICS -- Brazil, Russia, India, China and South Africa -- announced their own development bank in 2014, and China recently led the launch of a separate institution, the Asian Infrastructure Investment Bank.
The IMF reforms will help convince emerging economies to remain anchored in the multilateral system that the United States helped design and continues to lead, Lew said.
The Obama administration's proposed fiscal year 2016 budget includes the increase in the IMF financial commitment.