The G20 group of major economies’ Finance Ministers and Central Bank Governors had sharp words for the U.S. Congress on Friday, with the Group Treasurer describing Capitol Hill as being a “very difficult… obstacle” in their bid to pass internal reform of the International Monetary Fund.
Issuing the Group’s statement during the Fund and World Bank annual fall meetings in Washington, Australian Finance Minister Joe Hockey, whose nation currently holds the Group’s presidency said, ”It does affect the U.S. and their reputation, when there is global agreement and in fact agreement from the White House to undertake IMF reform… For domestic reasons the U.S. Congress might not be moving on this issue but for global reasons the U.S. should move on this issue.”
More broadly, the Ministers and Governors said regarding the world economy, “While some key economies are recovering, others face renewed weakness.” Their statement also emphasised an agreement regarding a Global Infrastructure Initiative, and a Global Infrastructure Hub to support the Initiative, to be finalised before the Group leaders’ summit in November.
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The issue of reforming both Bretton Woods institutions has been a long-standing struggle particularly for emerging economic powers such as India and China, who have consistently argued that the changing dynamics of global economic power favours their economies in the realm of growth and market size and it was high time that the Bank and Fund’s constituent structure reflected this new reality.
In 2011, shortly before the announcement of the candidacy of current IMF Managing Director Christine Lagarde, its Executive Directors from the BRICS economies openly revolted against the prospect of the top role reverting to a European, deepening the woes of an organisation that was recently rocked to its very core by the resignation of former Dominique Strauss-Kahn following sexual assault allegations.
At the group of EDs, including erstwhile India representative Arvind Virmani, called for the abandonment of the “obsolete unwritten convention,” that required the head of the IMF necessarily to be from Europe, arguing that the 2008 global financial crisis actually erupted in developed countries and its provenance “underscored the urgency of reforming international financial institutions so as to reflect the growing role of developing countries in the world economy.”
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This week Mr. Hockey echoed that sentiment and targeted the role of the U.S. Congress when he said, “I would say to Congressmen and the Senate, for the record, it is in the best interest of the U.S. to support the reform of the IMF, because everyone needs to have a proper voice at the table. It weakens the position of the U.S. if it is the sole Congress that remains an obstacle to the reform of a very important safety net.”
The Treasurer added that the G20 wanted the IMF to be “well resourced, well respected and well prepared,” and the best way to do that is to help it with its own reforms.