WASHINGTON – The International Monetary Fund strongly urged the United States on Saturday to ratify its 2010 quota and governance reforms as soon as possible amid strong discontent among members, especially emerging economies.
“We remain deeply disappointed with the continued delay” in moving forward the reforms aimed at granting more power to emerging economies, the International Monetary and Financial Committee (IMFC) said in a communique released after its meeting in Washington.
“Recognizing the importance of these reforms for the credibility, legitimacy, and effectiveness of the IMF, we reaffirm that their earliest implementation remains our highest priority,” the IMF’s policy-setting body said.
The consent of the U.S., the largest stakeholder in the Washington-based institution with 17 percent voting rights, is indispensable to implement the reforms, but Congress has rejected the plan.
“I would say that pretty much all the members expressed deep disappointment that the 2010 reforms have not been ratified in the U.S. and have not been implemented,” said Bank of Mexico Gov. Agustin Carstens, the chairman of the IMFC meeting.
The issue was also one of main topics discussed by the Group of 20 finance chiefs at their meeting, which wrapped up Friday. The issue drew strong dissatisfaction from emerging economies, including China.
“There were more voices of dissatisfaction from countries with smaller quotas compared with the previous meeting” in February, Finance Minister Taro Aso said at a press conference after the G-20 meeting Friday.
While some called for moving the reform plan forward without the United States, the country’s agreement holds the key to carrying out the reforms because the IMF needs to secure more than 85 percent of the total voting rights among its member economies.
On the prospects for the global economy, the IMFC said growth is projected to strengthen in advanced economies, but warned that risks still remain, citing such concerns as large fluctuations in exchange rates and asset prices as well as low inflation.
“Monetary accommodation should be maintained where appropriate, consistent with central bank mandates,” the IMFC said, adding that “careful calibration and effective communication of policy normalization is needed” to reduce adverse spillovers.
The statement came as emerging economies are concerned about possible negative impact of an expected interest rate hike by the U.S. Federal Reserve later this year, a move that could affect the global flow of funds.
IMF Managing Director Christine Lagarde said emerging economies have “different tools” to counter possible negative spillover effects stemming from the U.S. rate hike, such as capital outflows from developing markets.
“There are clearly different tools that can be used by the monetary authorities, by the fiscal authorities to respond to potential volatility as a result of the Fed’s monetary tightening”, she said.
Also Saturday, the joint IMF-World Bank Development Committee issued a statement and urged the World Bank Group to enhance its support for sustainable infrastructure development and financing to spur growth.
At a meeting of the committee, Japan said it would cooperate with the World Bank Group in such areas as promoting infrastructure investments, health care, disaster risk management and global environmental issues.