Brazilian Finance Minister Guido Mantega urged global policy makers to start exploring ways to overhaul the voting structure of the International Monetary Fund without the approval of the U.S. Congress.
“The IMF cannot remain paralyzed and postpone its commitments to reform,” Mantega said in a statement to the IMF steering committee yesterday. “Alternatives to move forward with the reforms must be found whilst the major shareholder does not solve its political problems.”
The U.S. Congress is stalling implementation of a 2010 pact by all IMF member countries that would increase emerging markets’ shares, or quotas, in the fund and boost its permanent lending capacity to about $739 billion. Group of 20 finance ministers and central bankers two days ago said they were “deeply disappointed” by the delay and vowed to explore “options for next steps” if the change isn’t completed by year-end.
Mantega said a way to unlock the deal is to decouple the quota increase from a measure changing the composition of the IMF executive board. The two provisions are currently linked under the IMF overhaul plan. On its own, the quota measure would only require a 70 percent majority, which the IMF already obtained.
Such a move “is legally feasible and would allow us to move forward regardless of what happens in the U.S. Congress,” Mantega said.
Brazil’s proposal reflects what French Finance Minister Michel Sapin described as the “frustration” of emerging markets around the table. Under the proposed changes, China would become the IMF’s third-largest member and nations from South Korea to Turkey would also gain voting rights.
Still Sapin, along with IMF Managing Director Christine Lagarde and Singapore’s Finance Minister Tharman Shanmugaratnam, who chairs the steering committee, said it’s best for now to focus on the year-end target.
“Plan A is going to be explored to the end and in depth and if that plan A doesn’t work, then we’ll worry about plan B but it’s currently premature,” Lagarde told reporters.
In his own statement to the IMF steering committee, U.S. Treasury Secretary Jacob J. Lew renewed the U.S. commitment to “fulfill our pivotal responsibility” in getting the measure approved this year.
Failure to do so could lead to “disruptive change,” Shanmugaratnam warned.
If the 2010 agreement is not implemented, “we are more likely over time to see a weakening of multilateralism, the emergence of regionalism, bilateralism and other ways of dealing with global problems, and that will not be a better world for all of us,” he said.