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Press Release: US Congress Fails to Pass IMF Reforms, Again

FOR IMMEDIATE RELEASE

Tuesday, March 26, 2014

US Congress Fails to Pass IMF Reform, Again
Major Blow for Global Economic Governance and Credibility of US Leadership

Washington, DC – Yesterday, Senate Majority Leader Harry Reid (D-Nev.) announced that the US Senate will remove the IMF reform legislation from its Ukraine assistance bill. This is a major setback for global economic governance and the credibility of US leadership. In 2010, the United States – in cooperation with emerging economies –spearheaded the IMF reforms. Since then, every country has ratified the reforms except for the US, whose approval is required in order for the reforms to become effective. Congress has had several opportunities to approve the IMF reforms, including January of this year.

“We are astonished that Congress failed, again, to pass the 2010 IMF reforms. This not only undermines the credibility of the US as a trusted leader and partner, it fragments global economic governance. US inaction weakens the prospects for international cooperation, especially with emerging powers. While these reforms are not perfect, they are a step toward bringing emerging powers to the table, instead of isolating and pushing them away” said Jo Marie Griesgraber, Executive Director of New Rules for Global Finance.

There was disagreement in Congress about the relevance of the IMF reforms to providing financial assistance to Ukraine, as well as misunderstanding of the IMF and the changes that the 2010 reforms would impose. The IMF reforms –which would provide a modest increase in voting power to emerging economies and reduce overrepresentation of European countries – would not require any new financial commitments from the US

“This was a win-win for members of Congress who would like to strengthen US global leadership, specifically its position on Ukraine vis-à-vis Russia, without additional costs to US taxpayers” stated Ms. Griesgraber. “It is disheartening that political brinkmanship has spoiled another opportunity to approve the 2010 IMF reforms.

We stand with former Cabinet members and government officials from both parties, as well as policy experts and civil society, who agree that the US Congress cannot wait any longer to approve the 2010 IMF reforms.”

###

Notes to Editor:

New Rules for Global Finance is a 501(3)c non-profit organization that promotes reforms in the rules and institutions that govern international finance; in order to support just, inclusive and sustainable economic development.

For more information, please visit www.new-rules.org.

Contact:

Nathan Coplin
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
810-348-3165

   

PRESS RELEASE: Letter to Congress Urges IMF Reforms as Part of Ukraine Assistance

FOR IMMEDIATE RELEASE – March 10, 2014

 

Broad-Based Coalition of Policy Experts Urges Congress to Pass IMF Reforms

Ukraine Economy and US Leadership at Stake

 

WASHINGTON, D.C. (March 10, 2014) —Today 190 policy experts, business and academic leaders, and former Senate-confirmed appointees who had oversight responsibilities for organizations like the International Monetary Fund (IMF) and World Bank delivered a unified message to Congress: promptly enact IMF quota reform legislation.  

The broad-based bipartisan letter to Speaker Boehner and Majority Leader Reid comes at a time when Congress is considering a $1 billion bilateral emergency assistance package for Ukraine to help the country stabilize its economy during its crisis with Russia. Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ) and Ranking Member Bob Corker (R-TN) displayed the foresight and joint leadership to respond strongly to the Ukraine crisis by introducing the Ukraine relief bill, which includes the IMF quota reform legislation. Ukraine is also seeking IMF assistance directly.

Treasury Under Secretaries Tim Adams, David McCormick, David Mulford, and Jeffrey Shafer, and five IMF Executive Directors that served under Republican Administrations, among other former senior government officials, support the IMF reform legislation. “The IMF has played a crucial role in the global approach to recent financial crises and in navigating the world economy through severe threats. While the United States is on a path to recovery, threats remain…and the IMF has been called upon to support reform in Ukraine. In times like these, a financially strengthened and reformed IMF is in the U.S. interest,” notes the letter.

The letter points out that “the IMF is the leading international institution dedicated to promoting U.S. objectives of advancing global growth, financial stability, and sound economic policy.” It implies that the integrity of the IMF as a global governance forum, as well as the credibility of the United States on the world stage, would diminish without strong U.S. leadership in the IMF. 

“Additional quota resources for the IMF are essential to preserve its central role in a global financial system that benefits the United States. Realignment of IMF quota shares, while preserving U.S. influence in the IMF, will enable the IMF to respond to shifts in the global economy, involving emerging powers more deeply in the institution and avoiding their disengagement,” notes the letter.

All other major countries, including those in the G-20, have ratified the 2010 reforms negotiated with substantial US leadership.  However, U.S. delays have prevented the quota and governance reforms from going into effect, thereby undermining U.S. credibility and influence in the IMF and the G-20. The signatories of this letter urge Congress to seize this opportunity to strengthen U.S. leadership, both vis-à-vis Ukraine and the global economy.

The letter was jointly distributed by New Rules for Global Finance and The Bretton Woods Committee.  The full text of the letter can be found here.

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The Bretton Woods Committee is the nonpartisan network of prominent global citizens, which works to demonstrate the value of international economic cooperation and to foster strong, effective Bretton Woods institutions as forces for global well-being. For more information contact: Randy Rodgers, Executive Director at 202-331-1616

New Rules for Global Finance is as a non-governmental organization with the aim to promote reforms in the rules and institutions governing international finance and resource mobilization, in order to support just, inclusive and economically sustainable global development. For more information contact: Jo Marie Griesgraber, Executive Director at (202) 277-9390

   

Letter to Congress Urging IMF Reform (with Signatures)

March 10, 2014 

To:

Senator Reid 
Majority Leader of the U.S. Senate
522 Hart Senate Office Building
Washington, DC 20510

The Honorable John Boehner
Speaker of the U.S. House of Representatives
1011 Longworth H.O.B.
Washington, DC 20515

Senator McConnell
Minority Leader of the U.S. Senate
317 Russell Senate Office Building
Washington, DC 20510

The Honorable Nancy Pelosi
Minority Leader of the U.S. House of Representatives
235 Cannon H.O.B.
Washington, DC 20515

Senator Menendez
Chairman, Senate Foreign Relations Committee
528 Senate Hart Office Building
Washington, DC 20510

Senator Corker
Ranking Member, Senate Foreign Relations Committee
425 Dirksen Senate Office Building
Washington, DC 20510

We write to urge you to work with the Administration to enact promptly the International Monetary Fund (IMF) quota and reform legislation. The signatories of this letter are former Senate-confirmed appointees who had oversight responsibilities for the IMF and the World Bank, as well as academics, policy professionals and experts from the private sector. Many of us have testified before Congress regarding these institutions. Regardless of our policy preferences for the IMF, we all agree on the importance of this institution to the United States.

The legislation would maintain the current U.S. financial commitment to the IMF, by doubling the U.S. quota (akin to equity shares in the IMF), and commensurately reducing the U.S. commitment to lend to the IMF’s New Arrangements to Borrow. In essence, the legislation seeks authorization to transfer funds within the IMF that the U.S. Congress has previously approved. The legislation would also approve an amendment to the IMF Articles of Agreement to implement associated governance reforms to realign representation on the IMF executive board.

The IMF is the leading international institution dedicated to promoting U.S. objectives of advancing global growth, financial stability, and sound economic policy. The IMF has played a crucial role in the global approach to recent financial crises and in navigating the world economy through severe threats. While the United States is on a path to recovery, threats remain. Uncertainty in Europe continues; Japan’s growth outlook is improved but not rosy; growth in big emerging market economies is slowing and a number of them are under increased stress; and the IMF has been called upon to support reform in Ukraine. In times like these, a financially strengthened and reformed IMF is in the U.S. interest.

Additional quota resources for the IMF are essential to preserve its central role in a global financial system that benefits the United States. Realignment of IMF quota shares, while preserving U.S. influence in the IMF, will enable the IMF to respond to shifts in the global economy, involving emerging powers more deeply in the institution and avoiding their disengagement. Positive action by the U.S. Congress on both elements will also unlock financial contributions from other countries.

Congressional enactment of the proposed IMF legislation will support U.S. leadership in global financial matters. Continued failure to act would diminish the role of the United States in international economic policy-making and undermine U.S. efforts to promote growth and financial stability.

We urge you to enact the proposed IMF legislation.

CC: All Senators and Representatives

 

 

First Name

Last Name

Affiliation (*for identification purposes only)

Tim

Adams

former Under Secretary of the US Treasury

Bishop

Akolgo

Executive Director, Integrated Social Development Centre

Tanweer

Akram

ING Investment Management

Lewis

Alexander

Leslie Elliot

Armijo

Portland State University

Marcel

Arsenault

CEO, Real Capital Solutions

Anders

Åslund

Peterson Institute for International Economics

John

Bailey

Professor of Government and Foreign Service, Georgetown University

Martin

Baily

Brookings Institution and former Chairman Council of Economic Advisers

Navin

Beekary

Former Head Anti-Corruption Commission and presently                                                                 Doctor in Juridical Studies at George Washington University Law School

C. Fred

Bergsten

Senior Fellow and Director Emeritus at Peterson Institute for International Economics                               and former assistant secretary of the US Treasury

Thomas

Bernes

Center for International Governance Innovation

Joerg

Bibow

Skidmore College

David

Biltchik

Consultants Internatianal Group

Nancy

Birdsall

Center for Global Development

Christina

Blanc

International Union of Anthropological and Ethnological Studies

Paula

Boland

United Nations Association of the National Capital Area

Jack

Boorman

Former Special Advisor to the Managing Director and                                                                 Director of the Policy Development and Review Department at the IMF

Barry

Bosworth

Brookings Institution

James M.

Boughton

Senior fellow, Center for International Governance Innovation and former Historian of the IMF

Colin

Bradford

Brookings Institution

Deborah

Brautigam

School of Advanced International Studies, John Hopkins University

Deanne

Breunig

Lawrence

Broz

University of California

Ralph

Bryant

Brookings Institution

Coralie

Bryant

American University School of International Service

Deborah

Burand

University of Michigan

Gerard

Caprio

Williams College

Michael

Chamberlin

Peter

Chase

Menzie D.

Chinn

University of Wisconsin, Madison

Eric

Clifton

former Deputy Director at the IMF

Isaac

Cohen

Former Director UNECLAC Washington Office

Faith

Colligan

Sisters of Charity Federation NGO

Richard N.

Cooper

Harvard University and former Under Secretary of State for Economic  Affairs

Nathan

Coplin

New Rules for Global Finance

Giovanni Andrea

Cornia

University of Florence

Heidi

Crebo-Rediker

Former Chief Economist/Assistant Secretary, US State Department

Sam Y.

Cross

former US Executive Director at the International Monetary Fund

Bowman

Cutter

former director of the National Economic Council and Deputy Assistant to the President

J. Dewey

Daane

Vanderbilt University

Tom

Dawson

former US Executive Director at the International Monetary Fund

Onn

de Beaufort Wijnholds

former Executive Director at the IMF

E. Whitney

Debevoise

Arnold & Porter LLP and former US Executive Director at the World Bank

Richard

Debs

Chair, Bretton Woods Committee International Council and                                                               Chairman, Morgan Stanley Saudi Arabia

David

Deese

Boston College

Alan

Derman

John

Donaldson

World Bank Group (retired)

Cinnamon

Dornsife

Warren

E. Emblidge, Jr.

McCullagh International

Martin

Edwards

John C. Whitehead School of Diplomacy and International Relations,                                              Seton Hall University

Barry

Eichengreen

University of California, Berkeley

Mahinour

El Badrawi

Egyptian Center for Economic & Social Rights

Anthony

Elson

Duke University Center for International Development

Joseph L.

Engelhard

Capital Alpha Partners

Ramon

Espinel

Senior Advisor the IMF Executive Board and                                                                                          former Minister of Agriculture for the Government of Ecuador

Rev. Seamus

Finn

Missionary Oblates of Mary Immaculate

Jeffrey

Frankel

Harvard University

Tony

Fratto

former Assistant Secretary of the Treasury and                                                                             former Deputy Assistant to the President

William

Frenzel

Bretton Woods Committee and Former U.S. Representative

Michael

Gadbaw

Georgetown University Law Center

Joseph

Gagnon

Peterson Institute for International Economics

Mirvari

Gahramanli

Oil Workers' Rights Protection Organization Public Union

Peter

Gakunu

former Executive Director at the IMF

Kevin

Gallagher

co-director Global Economic Governance Initiative, Boston University

Anna

Galpern

Georgetown University Law Center

Jeffrey

Garten

Yale University

Anna

Gelpern

American University Washington College of Law

John

Gershman

Robert F. Wagner Graduate School of Public Service, New York University

David

Gill

Thomas 

Glaessner

former Federal Reserve and World Bank Official                                                                       currently Head of Gavea Investments Washington DC office

Daniel

Goldman

Columbia University

Morris

Goldstein

Peterson Institute for International Economics

Matthew

Goodman

former Director for International Economics, National Security Staff

Ilene

Grabel

Josef Korbel School of International Studies, University of Denver

Jo Marie

Griesgraber

Executive Director, New Rules for Global Finance

John

Griesgraber

Bernhard

Gunter

American University

Charles

H. Dallara

former Assitant Secretary of the Treasury for International Affairs

Eva

Hanfstaengl

Director, Social Justice in Global Development

Daniel

Heath

Institute for International Economic Law, Georgetown University

Valerie

Heinonen

Dominican Sisters of Hope, Mercy Investment Services, Inc., Ursuline Sisters of Tildonk

Ricki Tigert

Helfer

former Chairman FDIC and Independent Consultant

Randall

Henning

American University

Barry

Herman

The New School, New York

John M.

Herrmann

former Special Assistant to the President for International Trade, Energy,                                           and Environment

Brett

House

Jeanne Sauvé Foundation and The Center for International Governance Innovation

Rev. Canon Robert

J. Brooks

Episcopal Diocese of Connecticut

Nancy P.

Jacklin

former US Executive Director at the International Monetary Fund

Harold

James

Princeton University 

Olivier

Jeanne

John Hopkins University and Peterson Institute for International Economics

Karen

Johnson

former Director, Division of International Finance, Federal Reserve Board of Governors

Joseph P.

Joyce

Wellesley College

Deborah

K. Hershey-Carder

Miles

Kahler

UC San Diego

Adam

Kanzer

Domini Social Investments LLC

Jacob

Kirkegaard

Peterson Institute for International Economics

Steven

Klees

University of Maryland

Gary

Kleiman

Member, Bretton Woods Committee

Donald

Kohn

Brookings Institution and former Vice Chair of Federal Reserve Board

Jim

Kolbe

former U.S. Representative

Mahesh

Kotecha

Structured Credit International Corp

Michael

Krimminger

Cleary Gottlieb Steen & Hamilton LLP

Gawain

Kripke

Oxfam America

Catherine

L. Mann

Brandeis University

John

Langmore

University of Melbourne

Mary Ann

Larkin

Alan

Lawson

Under Secretary of State for Economic Affairs

Terra

Lawson-Remer

Council on Foreign Relations

Eric

LeCompte

Executive Director, Jubilee USA Network

Dennis

Leech

University of Warwick

Danny

Leipziger

George Washington University School of Business

John

Lipsky

School of Advanced International Studies, John Hopkins University

David

Loevinger

former Deputy Assistant Secretary of the Treasury

Domenico

Lombardi

Center for International Governance Innovation

Clay

Lowery

former Assistant Secretary of the US Treasury

Nora

Lustig

Department of Economics, Tulane University

Iqbal

Mamdani

First Asian Investments

Barbara

Matthews

BCM International Regulatory Analytics

Bill

Mayer

Park Avenue Equity Partners

David

McCormick

former Under Secretary of US Treasury and                                                                                   Former Deputy National Security Advisor

Timothy J.

McKeown

University of North Carolina, Chapel Hill

Warwick

McKibbin

Brookings Institution

Mark

Medish

former US Treasury Deputy Assistant Secretary and                                                                       NSC Senior Director for Russia, Ukraine and Eurasia Affairs

Bessma

Momani

Brookings Institution and Center for International Governance Innovation

Mick

Moore

CEO, International Centre for Tax and Development

Scott

Morris

Center for Global Development and former senior US Treasury official

Todd

Moss

Center for Global Development and former State Department official

David

Mulford

former Under Secretary of the US Treasury for International Affairs

Tara

Nath Dahal

Freedom Forum

Anirudra

Neupane

Freedom Forum

Rob

Nichols

former Assistant Secretary of Treasury

Akbar

Noman

Initiative for Policy Dialogue, Columbia University

Maurice

Obstfeld

UC Berkeley

Jose Antonio

Ocampo

Columbia University

Seamus

O'Cleireacain

Columbia University

Sister Ann

Oestreich IHM

Sisters of the Holy Cross

Bro. Steven

O'Neil, SM

Marianists International

James C.

Orr

Bretton Woods Committee

Christopher A.

Padilla

former Under Secretary of Commerce for International Trade

Richard

Paullin

International Trade Association of Greater Chicago

George

Perry

Brookings Institution

Lynda

Pickbourn

Professor of Economics, Keene State College

Randy

Quarles

Peter

R. Fisher

former Under Secretary of the Treasury for Domestic Finance

Steve

Radelet

Georgetown University

Saurav

Raj Pant

Jeunes Volontaires pour l'Environment-Nepal

Vijaya

Ramachandran

Center for Global Development

Elida

Reci

Former Director of Ministry of Finance, Albania

Douglas

Rediker

Peterson Institute for International Economics and                                                                           former member of the IMF Executive Board

William A.

Reinsch

President, National Foreign Trade Council

Sister Jane

Remson

Carmelite NGO

Robert

Richter

Producer, The Money Lenders

Randy

Rodgers

Executive Director, Bretton Woods Committee

Riordan

Roett

School of Advanced International Studies, John Hopkins University

Kenneth

Rogoff

Harvard University

Liliana

Rojas-Suarez

Center for Global Development 

Andrew

Rose

UC Berkeley-Haas School

Namig

Rzayev

Peter

S. Heller

Williams College and former Deputy Director, Fiscal Affiars Dept, IMF

Jan Aart

Scholte

University of Warwick

Charles

Sethness

former Assistant Secretary of Treasury

John

Sewell

former President of the Overseas Development Council

Jeffrey R.

Shafer

Princeton University and                                                                                                                      former Undersecretary of the U.S. Treasury for International Affairs

Alexander

Shakow

former USAID Assistant Administrator for Policy and former Executive Secretary,                                   World Bank/IMF Development Committee

Faryar

Shirzad

former Deputy National Security Advisor

Prem

Sikka

Centre for Global Accountability, Essex Business School

Ruth E.

Smith

Jorge

Soeiro

David

Spencer

Richard

Stern

Director, Cities Centre, University of Toronto

Jean

Stoner

Sisters of Notre Dame de Namur

Jonathan

Strand

University of Nevada, Las Vegas

Arvind

Subramanian

Peterson Institute for International Economics and Center for Global Development

Larry

Summers

former Secretary of Treasury

Marat

Tazabekov

Economic Policy Institute, Kyrgyzstan

Robert

Thompson

John Hopkins University and Chicago Council on Global Affairs

Hung

Tran

Institute for International Finance           

James

Trowbridge

New Rules for Global Finance

Edwin

Truman

Peterson Institute for International Economics and                                                                       former Assistant Secretary of the US Treasury for International Affairs

Angel

Ubide

Peterson Institute for International Economics

Marsha

Vande Berg

Nicholas

Veron

Senior Fellow at Bruegel and                                                                                                                 Visting Fellow at Peterson Institute for International Economics

James Raymond

Vreeland

Georgetown University

Mark

Walker

Rothschild Group

Timothy

Wall

James G.

Wallar

former US Treasury representative to Iraq, the EU, Afghanistan,                                                           Russia, Germany and Switzerland

Josh

Warren

Foros Group

John

Weeks

Professor Emeritus, SOAS, University of London

Steven R.

Weisman

Peterson Institute for International Economics

Marina v.N.

Whitman

University of Michigan and former member of President's Economic Advisors

John

Williamson

Arthur

Wilmarth

George Washington University Law School

James

Wolfensohn

Co-Chair, Bretton Woods Committee and former World Bank President

 

Distributed jointly by New Rule for Global Finance and the Bretton Woods Committee

To sign this letter, or for questions, please contact:

Nathan Coplin
Email:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Phone: (810) 348-3165

   

IMF Makes Progress in Transparency

IMF Executive Board Reduces Lag of Public Access to Executive Board Minutes

Press Release No. 14/86
March 7, 2014

The Executive Board of the International Monetary Fund (IMF) today agreed to reduce the lag for public access to most Board meeting minutes from five to three years, while retaining the five-year lag only for minutes of discussions that involve Use of Fund Resources or a Policy Support Instrument. The decision offers a significant improvement in public access to the minutes of most IMF Board meetings, while mitigating the risks of prematurely disclosing information in the cases of ongoing IMF-supported programs.

The reduction of the lag for public access in respect of Board minutes - the fourth such reduction since 1996 – was discussed in the most recent Review of the Fund’s Transparency Policy, when the Executive Board endorsed new measures aimed at increasing the amount, timeliness, and accessibility of information that the IMF makes available to the public and agreed to consider options to further reduce the time lag – a request that was frequently mentioned during the consultations for the Review, including from Civil Society Organizations.

The Board considered that the decision strikes the right balance between informing the public about the Executive Board’s views, maintaining the candor of Board discussions, and ensuring that access to Board meeting minutes does not jeopardize ongoing Fund operations.

In order to allow time for the Fund and members to implement the new rules, the Board agreed to a transition period of six months; the new rules will therefore become effective for the minutes of all Board meetings taking place on, or after, August 27, 2014.

 

http://www.imf.org/external/np/sec/pr/2014/pr1486.htm

   

Press Release: Time to Move Forward with Reforming the IMF; Ukraine Economy and US Leadership at Stake

PRESS RELEASE
Tuesday, March 4, 2014

Sirens Ring for IMF to Put Out Another Fire
Time to Move Forward with Reforming the IMF: Ukraine Economy and US Leadership at Stake

Washington, DC – Amidst increasing tensions with Russia, Ukraine’s new government is requesting economic assistance to help restore financial stability, economic growth and market confidence. The Obama Administration is working with Congress to provide $1 billion in loan guarantees to Ukraine.  However, Ukraine’s financial needs are much greater. According to the new Prime Minister Arseniy Yatsenyuk, $37 billion has disappeared from state coffers. Although there are some efforts in Europe to also coordinate bilateral aid, the bulk of economic assistance will come from the International Monetary Fund (IMF). Even Russia has publicly supported this approach – a rare instance of agreement. 

US Congress will need to rethink its position on the 2010 IMF reforms – which it failed to approve as recently as last month.  Congressional approval is the only remaining impediment to implementing these reforms, which would support the IMF’s capacity to lend additional resources to Ukraine. Specifically, the reforms would increase Ukraine’s quota, which determines how much it can borrow, by about 50 percent. Commenting on the IMF reforms, Dr. Jo Marie Griesgraber, Executive Director of New Rules for Global Finance, said:

“Since it was the US that spearheaded the 2010 IMF reforms, the legitimacy of US leadership is at stake. While these reforms are not perfect, their approval would help reestablish the US as a trusted global leader and partner. We have heard the calls from Congress for stronger US leadership on Ukraine. This would be an excellent time for Congress to approve the IMF reforms.”

The 2010 IMF reforms would not require any new financial commitments from the US. The reforms would shift US contributions within the IMF from a current line of credit (known as the “New Arrangements to Borrow”) to the IMF’s general fund or “quota.” According to the Congressional Research Service, the US has never lost money on quota commitments. In fact, there is some nominal interest earned on these commitments. Ms. Griesgraber added,

“This is a win-win for members of Congress who wish to strengthen US global leadership, specifically its position on Ukraine vis-à-vis Russia, without additional costs to US taxpayers.”

###

Notes to Editor:

New Rules for Global Finance is a 501(3)c non-profit organization that promotes reforms in the rules and institutions that govern international finance; in order to support just, inclusive and sustainable economic development.

For more information, please visit www.new-rules.org.

Contact:

Nathan Coplin
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
810-348-3165

Jo Marie Griesgraber
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
202-277-9390

   

IMF Consultation - Triennial Surveillance Review

Dear Friends and Colleagues,

The IMF has just launched a public consultation for their “Triennial Surveillance Review.” They are welcoming input from CSOs on how to improve the effectiveness of their policy advice. New Rules plans to submit some comments, which we will share, but we encourage you to submit your own comments/recommendations and to share with other groups.

Consultation information available here http://www.imf.org/external/np/exr/consult/2014/tsr/index.htm

   

G20 Urges U.S Action on IMF Reforms by April

Carey L Biron, WASHINGTON, Feb 25 2014 (IPS) - The Group of 20 (G20) industrialised and emerging economies on Sunday formally expressed frustration with the ongoing inability of the United States to approve a major reform package that would see governance at the International Monetary Fund (IMF) shift more towards developing countries.

The reforms were approved by the IMF in 2010 and have since been ratified by more than three-quarters of the fund’s member governments. Yet while the administration of President Barack Obama has been a key proponent of the reforms, the U.S. Congress has thus far been unwilling to approve the changes.

Because the United States, with around 17 percent of voting rights (or “quota” shares) has an effective veto within the IMF, the reforms cannot go forward without the U.S. vote. The process has now missed a January deadline, while a second deadline for a subsequent round of changes is looming.

“Given that the U.S. is a big part of the G20, it is no small victory that emerging market and developing countries were able to get IMF reform so formally prioritised,” Kevin P. Gallagher, co-director of the Global Economic Governance Initiative at Boston University, told IPS. “Such pressure is basically the US administration and the rest of the world against the U.S. Congress.”

On Sunday, the G20, which has been a key organiser of the international financial response in recent years, strongly criticised the deadlocked reforms process. It also offered a new deadline for U.S. action.

“We deeply regret that the IMF quota and governance reforms agreed to in 2010 have not yet become effective,” the G20 stated in a communiqué on Sunday, following a ministerial meeting in Australia, which is hosting the grouping this year.

“Our highest priority remains ratifying the 2010 reforms, and we urge the US to do so before our next meeting in April. In April, we will take stock of progress towards meeting this priority.”

IMF Managing Director Christine Lagarde echoed this concern, saying Sunday that the fund “share[s] this view and urge[s] rapid progress on implementation.” The Washington-based institution is considered the world’s “lender of last resort”.

The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. It would do so largely by decreasing the cumulative share of European members, considered outsized in terms of gross domestic product.

The Netherlands and Spain, for instance, both have voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds the size of the Brazilian. Given the problems in the eurozone, the European countries have also been prime beneficiaries of IMF support in recent years.

Under the quota reforms, the so-called BRICS countries – middle-income countries including Brazil, India and China – would see their vote shares expand the most significantly. The 2010 reforms would shift around nine percent of these shares towards developing countries, while also doubling the size of the fund’s overall lending capacity.

“The Europeans love it – they’re gloating. They have excessive power, are significantly overrepresented, and they love that [the United States] is not moving the reforms process forward,” Jo Marie Griesgraber, the executive director of the New Rules for Global Finance Coalition, a Washington-based international network, told IPS.

“On the other hand, the BRICS are wondering why they put up their money when nothing is happening. They’re most unhappy. In the long term, the BRICS countries could say this doesn’t work for them and move more seriously away from the IMF.”

On Sunday, a top Indian finance official warned that the failure to move forward on quota reform was threatening to undermine both IMF and G20 legitimacy.

“This is perhaps the first visible failure of G20. This has reduced the credibility of G20,” India’s economic affairs secretary, Arvind Mayaram, said in Sydney, calling implementation of the 2010 reforms “vital for the credibility, legitimacy and effectiveness of the IMF”.

Alternative institutions

Although an esoteric topic, the IMF governance reforms have received widespread approval from important constituencies in the United States, including major business and financial lobby groups as well as a long list of Republican luminaries.

In fact, President Obama bears some blame for the current situation, having decided in 2012 for political reasons not to request approval from the U.S. Congress. Yet since then, his administration has tried to do so repeatedly.

Each time, however, the Republican-controlled House of Representatives has rebuffed these requests, though apparently less for ideological than for political reasons. The last such attempt took place last month, when Republicans agreed to include the IMF reforms proposal in a major appropriations bill – but only if the Democrats would agree to stop the U.S. Treasury from imposing proposed restrictions on political “dark money”.

President Obama reportedly refused the trade, and there are few legislative options left for moving related legislation through Congress in coming months, particularly as national elections loom at the end of the year. (On Sunday, U.S. Treasury Secretary Jacob Lew told the G20 his office “will continue to work with Congress to pass legislation as soon as possible to secure the 2010 reforms, which are vital to our economic and national security interests.”)

Some observers say that such a situation should only strengthen an ongoing process under which developing countries are building multilateral structures outside the IMF.

“Upcoming Congressional elections may lead to further entrenchment by the U.S. on this issue. Thus it is imperative that the developing world continue to build alternative institutions such as the BRICS bank and the BRICS exchange reserve pool,” BostonUniversity’s Gallagher says.

“Just as important is for these bodies to have more equitable and transparent processes, so they can be held up as models against the arcane structures in the international financial institutions.”

The BRICS countries announced their intention to create a new multilateral development bank last year. Yet since then, progress has reportedly been slow, particularly as ongoing economic roiling is being felt particularly strongly in emerging economies.

“There is good talk about these projects, but most countries remain very reluctant to walk away from the [IMF]. Nonetheless, we are already seeing a gradual erosion in the use of the institution,” New Rules’s Griesgraber says.

“From our perspective, we need to get through this current reform process so we can move on to the larger governance issues that need to be addressed at the fund. Let’s equalise the power, introduce greater transparency around the board, and ensure that likely consequences for poor people are assessed before the IMF acts.”

 

This article was originally published at http://www.ipsnews.net/2014/02/g20-urges-u-s-action-imf-reforms-april/

   
   
   
   

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