The Group of 20 countries has criticized the United States for blocking reforms to both expand the International Monetary Fund’s resources and give China and other rising economies more say in the crisis lender’s governance.
Meeting on the sidelines of the US-based IMF’s twice yearly meetings, the finance ministers and central bank governors of the world’s leading advanced and emerging economies said they “remain deeply disappointed with the continued delay” in implementing the IMF reforms agreed in 2010, News.com reported.
The measure remains stalled in the US Congress, where legislators object to increased commitments of financing to the IMF, as well as to diluting the US voting weight on the IMF board and to expanding in particular China’s vote.
“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 G20 communique said.
“We continue to urge the US to ratify the 2010 reforms as soon as possible.”
The G20, in which the US is a member, proposed an interim solution that “meaningfully” reallocates IMF shares to give at least some fast-growing emerging and developing countries voting weights that better reflect their importance to the global economy.
Fear Volatile Markets
Finance officials expressed concern about the risks of market and exchange rate volatility but avoided talk of Greece’s financial plight, AFP reported.
They said the apparent strengthening in advanced economies “could support a stronger global recovery.”
But they warned the economy is still vulnerable to “important challenges” including exchange rate volatility, stubborn low inflation, high public debt and geopolitical tensions.
But the group avoided any official mention of the biggest risk to financial stability at the moment, the risk that Greece could default on hundreds of millions of dollars worth of debt and drop out of the eurozone.
“This was not discussed during the official sessions of the G20,” said Ali Babacan, the Turkish deputy prime minister and current G20 president.
Fresh fears that Greece will not secure more bailout funding from the European Union before huge loan payments come due in have sent European equity markets falling again on Friday.
Boost Growth
While the group avoided Greece, it did say that countries need to do more to boost growth for the near term, and that major central banks need to communicate clearly their policies not to add to market turmoil.
Babacan though said that the US Federal Reserve, whose plan for raising interest rates this year has sent shivers through global finances, is doing “a much better job” of communicating its intentions.
“Clear communication is very important not just for the US economy but globally because of the possible spillover effect,” he said.
Voting Rights
The G-20 also discussed ways to raise emerging countries’ voting rights at the IMF as part of an effort to move past US foot-dragging on reforms to the institution, but they failed to reach an agreement.
The IMF’s member countries agreed in 2010 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.
That plan was discussed, along with another proposal to push through the voting reforms without doubling the Fund’s resources, which would see the loss of the US veto, according to officials in attendance.
The “ad hoc” interim plan made it into a draft communique by the G-20 finance ministers and central bank governors, but it was dropped from the final version after officials failed to come to an agreement.
“We call on the IMF executive board to pursue an interim solution that will meaningfully converge quota shares as soon as and to the extent possible to the levels agreed under the (2010) review,” the G20 said in its final communique.
