US Congress Should Demand IMF Reforms in the Wake of Large Increase in IMF Funding
WASHINGTON, D.C., July 15, 2009
The United States should negotiate governance reforms of the International Monetary Fund (IMF) following Congressional approval of large increases in its lending to poor countries, according to a leading advocacy group, New Rules for Global Finance, and a UN economist. These reforms should make the IMF’s governance structure and practices more accountable and transparent, which in turn will contribute to policies that will result in better outcomes for poor countries and poor people.
On June 16, Congress passed legislation increasing the U.S. commitment to the IMF by more than $100 billion as part of an agreement by the Group of 20 member nations to boost the institution’s resources as it works to help countries weather the financial crisis. Representative Maxine Waters (D-CA), with the support of 40 members of the House, led a partially successful effort to attach IMF reforms to bill. (See letter and list of signers at http://www.house.gov/apps/list/press/ca35_waters/imfletter.html) The final bill contains language calling upon U.S. officials who sit on the IMF board to oppose loans or agreements with some 40 poor countries that would restrict spending on health care, education, food aid, or other safety net programs. It also requires the IMF to use at least $4 billion from the sale of some of its gold for new lending or debt relief for poor countries.
While these reforms are a significant step forward, they do not go far enough, according to New Rules for Global Finance, which advocates for policy changes to make the IMF more responsive to the needs of poor people.
“The U.S. Congress should not hand the IMF such a huge and nearly blank check,” said Jo Marie Griesgraber, Executive Director of New Rules for Global Finance. “It should at least demand increased accountability and transparency of the institution. That way, we will have some way of knowing whether the IMF is acting in the interests of people suffering most from the economic crisis.”
New Rules and other advocates are seeking to attach additional reforms to the annual foreign assistance spending bill. They worked with Representative Maxine Waters (D-CA) to insert additional reform language into the report accompanying the House version of the spending bill. Last week, on July 9, the Senate Appropriations Committee approved a spending bill that would require US officials who sit on the IMF board to promote publication of Board documents and summaries of minutes within two years. The bill also requires that parliaments in borrowing countries approve any IMF loans or agreements. New Rules and other advocates urge that these provisions be retained as the bill proceeds soon to the full Senate, then is reconciled with the House version of the spending bill.
Others point out that additional IMF reforms will be needed in the future, especially increasing the voice and representation of developing countries in the decision making of the Fund
“In the IMF, voting rights favor some rich country governments in an out-dated system inherited from the end of the Second World War and modified undemocratically since then,” says Dr. Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development in the United Nations Department of Economic and Social Affairs (UNDESA).
Without increasing the decision-making power of developing countries, the IMF will continue to suffer from the lacks of legitimacy and support it requires to do its job,” he points out.
New Rules for Global Finance is a network of nongovernmental organizations that seeks to promote stable global financial systems which reduce global poverty and inequality by advocating technically sound approaches to be undertaken by global financial institutions, by advancing reforms of the governance and practices of these institutions, and by organizing non-governmental organizations, policy-makers and advocates to achieve these ends.
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