2023-10-06 23:50:35
© Reuters. IMF logo in Washington, USA 9/4/2018 REUTERS/Yuri Gripas/File
By David Lawder
WASHINGTON (Reuters) – The United States faces an uphill battle in persuading other International Monetary Fund (IMF) member countries to expand the fund’s loan reserve resources without increasing the equity stakes of China, India and Brazil, government officials and development experts.
As global finance officials prepare to gather in Marrakesh, Morocco, for next week’s IMF and World Bank annual meetings, where a review of IMF quota resources is expected to be a contentious topic, some are already anticipating further delay in decision-making.
“Quota increases without realignment would weaken the Fund politically,” a Brazilian official told Reuters, adding that Brazil, China and India deserve a bigger role in the IMF commensurate with their growing stature in the global economy.
Quotas contributed by member countries in proportion to their voting power now represent more than 40% of the fund’s $1 billion firepower, which has been strained by the years of the Covid-19 pandemic, inflation, climate change impacts and repercussions of Russia’s war in Ukraine.
The rest of the financing is made up of emergency capital pledges and bilateral loans, sources considered less reliable.
Increasing quotas would allow developing countries to access larger loans and provide more security than current agreements. The IMF argues that increased resources are “vital” to safeguard the global economy against future shocks.
Quotas have not been increased since 2010, a move that gave greater voice to China, Brazil and other fast-growing emerging market economies at the expense of European countries.
If this were to happen again, China would likely see the biggest increase, as it controls just 6.08% of the IMF’s voting power but represents 18% of global gross domestic product based on the fund’s own estimates. The US is by far the IMF’s largest shareholder, with 16.5% of voting power.
But with anti-China sentiment firmly rooted in the US Congress, any move to increase the Asian giant’s share would cause a political backlash for US President Joe Biden, who is seeking re-election next year.
The plan that US Treasury Secretary Janet Yellen will promote at the Morocco meetings would see countries contribute new money in proportion to their current quotas, with changes to the formula coming later.
As an incentive for emerging markets, the US proposes adding a fifth deputy director general to represent the interests of middle-income countries, and another member of the Executive Board to represent more sub-Saharan African countries.
Doing so, Ivory Coast President Alassane Ouattara said Thursday, would “increase the voice and agency of member countries that are the most vulnerable” in the Fund.
(Reporting by David Lawder; additional reporting by Andrea Shalal in Washington and Marcela Ayres in Brasília)
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