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March 11, 2013 1:00 pm
Almost 100 policy makers and academics have written to the US Congress urging the ratification of crucial reforms of the International Monetary Fund that international leaders agreed more than two years ago.
The signatories argue in an open letter, sent to House of Representatives and Senate leaders on Monday and seen by the Financial Times, that if the US does not sign up it will undermine its authority in negotiations at the G20 and other institutions that govern the world economy.
“Failure to act would diminish the role of the United States in international economic policy making and undermine US efforts to promote growth and financial stability,” the letter says.
Signatories include holders of the top international economic job at the US Treasury under Republican and Democratic administrations. They include Tim Adams, who worked for former president George W. Bush, and Jeffrey Shafer, who was part of the Clinton administration.
The 2010 reform doubles the IMF’s quota – in effect its equity capital – to $720bn; it shifts six percentage points of total quota to developing countries; and moves two of the 24 IMF directorships from European to developing countries.
But it cannot take effect until the US ratifies the package. Some Republicans in the House oppose giving any extra US resources to the fund.
One option is to bundle the quota increase in a law to fund the government – a so-called “continuing resolution” that must pass by the end of the month – but the House did not include the IMF in a version it passed last week.
A spokesman for John Campbell, the Republican congressman who heads the relevant subcommittee, said that he is waiting for President Obama to send an “official and detailed” request. “President Obama’s rationale for the IMF quota increase is particularly important,” he said.
The US can boost its quota without extra exposure to the fund because it has promised to lend $100bn to the IMF as needed. Once it ratifies the reform, it will convert $65bn of that into quota.
“We are actively working with Congress to get quota legislation completed as soon as possible,” said the US Treasury, which declined to comment on the continuing resolution or other legislative options. “As the only country with a veto, implementing the quota reform will enable the US to preserve its leadership in the IMF without any new financial commitments.”
If IMF quota is not part of the continuing resolution then it may be months before Congress takes up another big, must-pass package of economic measures.
Having spearheaded IMF reform efforts in the first place, the US is now holding its completion back, said Domenico Lombardi, senior fellow at the Brookings Institution and a signatory of the letter.
Failure to shift representation and voting power to fast-growing countries such as China threatens the legitimacy of international financial institutions such as the fund, said Mr Lombardi. “There is a real risk that IMF reform may be losing momentum.”
A further round of IMF quota reforms is already under discussion and due for completion in January 2014. The US has less voice in that debate while it is still holding up the last round, according to several people involved in the process.
The letter was co-ordinated by New Rules for Global Finance, a non-governmental organisation that scrutinises international financial institutions such as the IMF and the World Bank.
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