By Dow Jones Business News, March 06, 2013, 02:25:00 PM EDT
--U.S. administration says changes to the International Monetary Fund are needed to preserve U.S. influence there
--The legislation could still be approved later in budget negotiations
--Critics wary of giving emerging markets more power
WASHINGTON--U.S. Republican lawmakers this week rejected a White House request to ratify major changes to
International Monetary Fund governance that would give emerging markets such as China, Mexico and Brazil greater power
at the lending institution.
The IMF governance changes were submitted to Congress in a proposed stopgap funding bill, but weren't included in
House of Representatives appropriations legislation unveiled Monday. Still, the request could be included in later
budget negotiations.
The administration says the legislation is necessary to preserve U.S. leadership at the lending institution and
prevent loss of influence.
The U.S. Treasury didn't include the IMF request in funding bills last year, believing it stood little chance of
passage in the fierce political battles over the budget. The official request may indicate the administration has higher
hopes this year.
"We are actively working with Congress to get quota legislation completed as soon as possible," said Treasury
spokeswoman Holly Shulman.
If ratified by Congress, the changes would make China the third-largest shareholder, moving it up three positions past
Germany, France and the U.K., and put India and Brazil in the top-10 list. They would also pave the way for emerging
countries to gain more influence on the fund's board at the expense of European nations.
Treasury officials agreed to the IMF governance changes in 2010, saying they are needed to ensure the institution's
legitimacy, especially among developing economies considering alternative financing institutions.
The deal needs Congressional approval, however.
As some developing countries have evolved into economic powerhouses, their power at the fund hasn't grown in
proportion. Treasury officials say those nations need more say at the IMF to encourage them to act "responsibly" in an
increasingly interconnected global economy.
Many emerging markets have complained about Europe having an outsized influence in the fund, even though its
proportional contribution to the global economy has shrunk. For the past seven decades, for example, a European has
headed the institution.
But some lawmakers are wary of giving emerging markets greater say at the IMF, concerned that might shift the fund's
economic values away from western nations' preferred policies.
Part of the changes include shifting $65 billion of a $100 billion U.S. loan to the fund from an emergency account to
the IMF's central lending cash pile.
Treasury says moving the money into the core lending account will help preserve U.S. leadership at the IMF. The fund
is currently relying in part on emergency loans from major economies rather than the member dues that normally make up
the IMF's lending resources. Treasury believes that relying on those one-off loans gives those countries, including
China, disproportionate influence.
Some critics say that the accounting shift would remove an extra layer of protection against potential IMF loan
losses, even though the fund has never lost money from its lending. It also means the U.S. would give up a measure of
control over the IMF's lending.
Under the 2010 agreement, the governance changes are required to move the IMF's emergency funds over to its core
lending accounts.
Others critics question whether the IMF needs the additional resources.
Though it never passed, nearly a quarter of House lawmakers backed a bill last year to repeal the entire $100 billion
emergency U.S. loan to the IMF in 2009. Still, it gave Republicans a talking point amid budget battles with Democrats.
Write to Ian Talley at ian.talley@dowjones.com
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03-06-131425ET
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