Advertisement

G20 to sidestep U.S. on IMF reforms - draft communique

By Anna Yukhananov WASHINGTON (Reuters) - The Group of 20 leading economies was set on Friday to agree to a proposal that would raise the voting rights of emerging countries at the IMF, an attempt to move past U.S. foot-dragging on reforms to the institution. The IMF's member countries agreed in 2010 to reform the institution to give more voting power to countries like China and India, double the Fund's resources, and reduce the dominance of Western Europe on its 24-member board. But the Obama administration so far has been unable to persuade the U.S. Congress to pass funding changes necessary for the agreement. The United States can block the IMF reforms because it holds a controlling share of votes. To get around the United States, the IMF's board had proposed one "interim" plan to raise the voting rights of some emerging countries under an "ad hoc" increase without touching U.S. veto power. "We stand ready to pursue an interim allocation that will converge quota shares, to the maximum extent possible, to the levels agreed under the (2010) review," G20 finance ministers and central bankers said in a draft communique. "This should deliver a substantive shift of voting power to dynamic emerging market and developing countries, and to underrepresented countries," they said. But countries like China would only get a small bump in their shares under this option, which requires all changes to allow the United States to keep at least 15 percent of the votes. The interim proposal also would not resolve the IMF's financial crush, as it increasingly relies on temporary arrangements approved during the height of the 2007-2009 financial crisis to fund major loan programs in countries like Greece and Ukraine. Some other countries including Brazil and Russia also had pushed a second proposal, known as "de-linking," in which the IMF board would detach the doubling of resources from changes to the board structure, and the United States would be asked to temporarily give up its veto power until it ratified the reforms. But the United States would have to agree to do so, which most Fund officials admitted was unlikely. In the draft, the G20 ministers said they remained "deeply disappointed" the 2010 reforms had not been approved, and urged the United States to ratify them as soon as possible. (Reporting by Anna Yukhananov; Editing by Paul Simao)