IMF ‘cannot force US’ over reforms

IMF chief Christine Lagarde has said there is not much she can do to push reform and give emerging economies a bigger say without the support of the US.

China in January called on IMF member nations to stick to a commitment to give emerging markets more power at the global lender after US politicians set back historic reforms that would give developing countries a greater say.

The remarks by China’s foreign ministry were an indirect criticism of the US, where politicians that month failed to agree on funding measures needed for reforms to move forward.

The US Congress must sign off on the IMF funding to complete 2010 reforms that would make China the IMF’s third-largest member and revamp the board to reduce the dominance of Western Europe. Speaking in Beijing, Lagarde said this was a matter for the US to complete the process and ensure relevant legislation can be passed.

that she hoped emerging economies could have a bigger voice within the institution. The reform of the voting shares, known as quotas, cannot proceed without the US, which holds the only controlling share of IMF votes.

After putting off the request in 2012 because of the presidential election, the US treasury has sought to tuck the provision into several bills since March last year.

The administration’s requests, however, have been met with scepticism from some Republicans, who see them as tantamount to approving fresh funding in a tight budget environment.

Some US politicians have also raised concerns about how well the IMF is helping struggling economies in Europe and the risks attached to IMF loans, suggesting Congress is in no hurry to approve any changes.

Developing nations have long viewed the IMF with suspicion for promoting disastrous privatisations that complicated the transition from communism for some emerging nations in the early 1990s, and for pushing budget cuts that exacerbated debt crises in Asia and Latin America a few years later.

That suspicion has been compounded by a power structure that dates to the IMF’s founding in 1944. The structure was shaped by the victors of the Second World War — the US and other Allied nations.

Reuters