International Monetary Fund (IMF) managing director Christine Lagarde could not do much to push reform at her organisation and give emerging economies a bigger say without the support of the US, she said yesterday.
In January China called on IMF members to stick to a commitment to give emerging markets more power at the global lender after US legislators set back historic reforms that would give developing countries a greater say.
The January remarks, made by China’s foreign ministry, were an indirect criticism of the US, the biggest and most powerful IMF member, where legislators that month had failed to agree on funding measures needed for the reforms to move forward.
The US Congress must sign off on the IMF funding to complete 2010 reforms that will make China the fund’s third-largest member and revamp its board to reduce the dominance of western Europe.
Speaking at Beijing’s elite Tsinghua University, Lagarde said this was a matter for the US to complete the process and ensure that the relevant legislation could be passed.
“This is not something I can do much about,” she told students, adding 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 American presidential election, the US Treasury has sought to tuck the provision into several bills since March last year.
Requests by President Barack Obama’s administration have been met with scepticism from some Republicans, who see them as tantamount to approving fresh funding in a tight budget environment.
Some US legislators 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 World War Two – the US and other Allied nations.