U.S. Proves Stumbling Block in IMF Reform
After urging the IMF to reform, the United States has been dragging its heavy feet and blocking, in fact, proposals aimed at giving emerging economies more say in the global lender.
The U.S., by far the biggest stakeholder in the 188-nation International Monetary Fund, is the only member of the Group of Eight that has yet to ratify a quota hike that would double its permanent resources to about $767 billion and executive board reforms that would strengthen the role of emerging economies.
Among the Group of 20 major economies, only Argentina, which has a troubled history with the IMF, has shown the same reluctance to commit.
But the U.S. standstill is critical: without the support of its 16.7 percent voting rights, the 2010 governance and quota reforms are dead in the water.
Operating in high gear amid the Eurozone debt crisis, the IMF still hopes, officially, to meet a deadline for the approval of the reforms this year.
"My objective is certainly to get as close as possible to the finishing line," IMF managing director Christine Lagarde said in late July, while admitting the fund was "still short" of approving the proposed governance reform.
The target deadline for reforms as the annual meeting on October 12-14 in Tokyo.
According to an IMF update released Monday, the governance reform has been ratified by 102 countries representing 65.9 percent of voting power; well shy of the 85 percent needed to rebalance the board to better reflect today's global economy.
Currently China, the second-largest economy, holds only 3.8 percent of the voting power at the Washington-based financial institution, not much more than Italy's 3.1 percent weight.
Under the reform, China's voice would nearly double, to 6.0 percent.
"We welcome the significant progress thus far towards implementing the quota and governance reforms, and we urge remaining countries to complete the necessary steps quickly," an IMF spokesman told Agence France Presse.
The stumbling block, the United States, was a leading champion of IMF rebalancing adopted at the G20 summit in Seoul, calling for multilateralism and softly criticizing European countries' overrepresentation on the board.
Though President Barack Obama has backed the reforms, which maintain the U.S. veto power over major decisions at the IMF, they require approval by Congress.
"There's a sort of irony that the country that has initially spearheaded the current reform package is now de facto blocking its approval," Domenico Lombardi, a former IMF board member, told AFP.
According to Lombardi, the United States was balking at raising China's voting power mostly because of "increasing frictions," especially in the trade arena, between the two countries.
But according to several people familiar with the situation, the Obama administration has shied away from putting the reforms to a vote in Congress amid the politically charged run-up to the November 6 presidential and congressional election.
"A group of U.S. lawmakers is extremely hostile toward the IMF," said a person at the IMF who requested anonymity.
"As the IMF is increasingly in the limelight, the Congress is now going to use that as a subject for their own domestic constituents," Bessma Momani, a political science professor at the University of Waterloo in Canada.
Momani predicted the IMF reform would fail if the Republican challenger to Obama's re-election, Mitt Romney, wins.
"You will see a very antagonistic administration to these (international) organizations," she said.
Contacted by AFP, the U.S. Treasury Department decline to comment on the U.S. government's position.
However, an administration official, speaking on condition of anonymity, reiterated the nation's commitment to get the IMF reform done in 2012.