G20 urges US to ratify IMF reforms by year-end

G20 urges US to ratify IMF reforms by year-end

WASHINGTON - The G20 pressed the United States on Friday to ratify crucial IMF reforms after four years of waiting, suggesting they would find an alternative if Washington does not deliver by year's end.

The reforms, which include a funding increase and expansion of emerging economies' roles in the International Monetary Fund, were originally strongly backed by the United States, the Fund's largest shareholder.

But implementation, which must have US support, has been held up by political battles in the US Congress, which needs to ratify the reforms.

"We are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms" agreed in 2010, the G20 said in a statement.

"The implementation of the 2010 reforms remains our highest priority and we urge the US to ratify these reforms at the earliest opportunity." The Group of 20 economic powers, which includes the United States, said it would ask the IMF to develop an alternative plan "if the 2010 reforms are not ratified by year-end." Senators from President Barack Obama's Democratic Party tried to push through reforms by attaching them last month to an aid bill for Ukraine, but backed down faced with opposition from the rival Republican Party.

Conservative Republicans have charged that the IMF reforms increase the US contribution while weakening its role.

US Treasury Secretary Jacob Lew pledged to work for ratification this year and insisted that the Obama administration was making "enormous progress," blaming the failure so far on extraneous issues before Congress.

"I believe that ratification of the IMF reforms is really important for US national security; it's important for global financial security," Lew told reporters.

Lew noted that the United States would retain veto power on the IMF board.

He pointed to plans for an IMF bailout of Ukraine - which is facing intense pressure from Russia - and said the Fund may not have supported such robust measures without the strong US role.

Time for Plan B?

Japanese Finance Minister Taro Aso said that the IMF should decide on whether to seek an alternative after looking at the results of US congressional elections in November.

"Maybe we have to see the election results and what the position of the US is. If ratification is denied, the IMF will have to think about what should be done. So they can go back maybe to think about an alternative reform plan if it's required," Aso told reporters.

Aso said that Japan - the second largest shareholder in the IMF after the United States - had accepted the 2010 reforms even though its share would be slightly diluted.

Wolfgang Schaeuble, finance minister of Germany, another IMF power, said US ratification would "strengthen the fund's legitimacy as well as its capacity to act." "As a token of their goodwill, the US should finally ratify the IMF reforms to give the rising powers of the 21st century a say in the Fund's affairs." Under the proposed reforms, the US quota share in the IMF would slip slightly from 17.69 per cent to 17.40 per cent. China - the world's second-largest economy - would become the Fund's second shareholder.

The reforms also double the amount of money the IMF has to lend, an action necessary after the crisis that began in 2008 ravaged the US and European economies.

Congress would not need to approve any new spending immediately as part of IMF reforms as money would be shifted from an emergency fund that is winding down.

Asked whether the IMF was preparing a "Plan B," IMF steering committee chair and Singapore Finance Minister Tharman Shanmugaratnam said the Fund was focused on allowing the US to move by year's end.

"Any other options will be discussed only if the 2010 reforms are not put into place by the end of this year." Few expect US lawmakers to do that before November's mid-term congressional elections. But that would leave several weeks for the outgoing Congress to sign off on the reforms by December 31.

More about

Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.