IMF board warms to interim reform deal

IMF board warms to interim reform deal

Signals US that time is running out

IMF board warms to interim reform deal
A compromise deal on reforms to give emerging markets greater influence at the International Monetary Fund (IMF) is increasingly likely, a key official said on Friday, weeks before a deadline for US action expires.

Plans agreed in 2010 to give emerging markets more IMF voting power and double the Fund’s resources have been delayed by the fact the US Congress has not approved the change.

If Congress does not pass reforms by September 15, the IMF board has said it will discuss an “interim solution” by month’s end. Options include increasing the quota for key emerging economies without requiring any change in the US position.

Rakesh Mohan, the IMF’s executive director for Bangladesh, Bhutan, India and Sri Lanka, told Reuters: “There’s more and more likelihood that something like that will happen.”

“We could do some ad-hoc changes like we did in 2008. You could increase the shares of some countries that are most under-represented, China, India.” The comments suggest that opposition among emerging markets to any halfway measures may be abating.

“This is a signal to the administration and to Congress that the world is ready to proceed without them,” Peterson Institute for International Economics senior fellow Jacob Funk Kirkegaard said.

But Brazil’s representative on the executive board, Otaviano Canuto, said his country had not yet abandoned hope of a full-fledged reform, although he said the discussion would “probably” head towards an ad hoc change as an interim step.

“We have not given up yet,” he said in an interview in his office in Washington, noting that the final deadline for Congress to act was the end of 2015. So-called ad hoc changes would probably result in the US quota share falling from its current 17.7 per cent, although remaining above the 15 per cent threshold that gives the country a veto on key IMF decisions. But it would fall short of the change in governance and funding originally envisaged.
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