The United States Congress has taken a step closer to granting long-awaited approval to reforms of the International Monetary Fund that would give China and other emerging economies a greater voice in shaping the institution's policies.
The text of a US omnibus spending bill, released on Wednesday as part of a budget deal, includes approval for the Obama administration to finally vote for stalled 2010 quota reforms that have become a source of tension between US and IMF.
The 2010 reforms called for a doubling of the IMF's quotas, or the capital countries contribute, and a reallocation to give countries such as China a greater say at the fund. Under the reforms now expected to go ahead, China's voting share at the IMF would increase from 3.8% to 6% while the US would see its share shaved from 16.7% to 16.5% and preserve its veto. The big losers would be European economies, which would see their voting rights diminished.
The 2010 reforms were initiated in part by the Obama administration in a bid to keep China happy and within the Bretton Woods system. But their stalling in Congress amid Republican concerns that they would diminish US influence at the IMF is seen by many as contributing to Beijing's decision to establish alternative institutions such as the Asian Infrastructure Investment Bank.
[Congressional approval for the reforms] is important. It is definitely belated. And I think there are some costs to that, said Benn Steil, head of the international economics programme at the Council on Foreign Relations and author of The Battle of Bretton Woods.
The slow US approval of the 2010 reforms had given considerable moral weight to Beijing's pursuit of alternatives and helped it secure the backing of US allies in Europe and Asia for the AIIB, added Steil.
But, in what could become a new cause for friction between the US and IMF, the spending bill calls for a greater role for Congress in approving extraordinary loans by IMF.
It also requires the US to pursue the repeal of a systemic exemption created in 2010 to allow the IMF to take part in the Europe-led rescue of Greece's economy.
Under the legislation, a US administration would have to inform Congress at least seven days before any IMF board vote on granting what is known as exceptional access to fund resources above the normal caps. The bill also calls for a study into whether the IMF should require collateral for loans made under those terms, raising the possibility of countries such as Greece having to hand over control of large parts of infrastructure such as ports or power plants to the IMF in order to secure rescue funds.
One senior Republican aide involved in the talks said the inclusion of the conditions, particularly with regard to a push to eliminate the systemic exemption used for Greece, had been crucial to overcoming conservative concerns about the reforms and IMF bailouts.
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Too late for that. The BRICS countries are only waiting for the end of the grace period to withdraw the amounts subscribed. At the same time the five countries will ask their exonerations of the unilateral organization.Dec 17th, 2015 - 04:39 pm 0
Read the regulations of the Bank of BRICS.