The U.S. is showing signs of finally accepting the IMF reform regarding the developing countries’ power and contributions within the financial institution. Although the U.S. initially opposed the reform it would seem that it is about to change its mind and it is ready to make compromises. The White house leader has asked the Congress for authority on the reform but the sequester cuts could be a reason for delaying the process.
While some political leaders are strongly against it, the reform could turn out to be helpful for developed countries because it would take some of the pressure from them thus allowing them to better deal with the economy crisis.
The plan was voted on in 2010 and it stipulates that growing emerging market countries will have a bigger vote percentage and also the resources that the International Monetary Funds has will be tripled. The fact that America is the biggest contributor of the financial institution allows it to veto the IMF reform. However congress is actively working in order to eliminate all of the obstacles from the reform’s way.
In order for the reform to be enforced it needs 113 of the 188 member countries to agree on it. That would mean that 85% of the voting should be in favor of the reform. However the fact that America has a 16, 7 voting right has been an impediment so far.
One of the reasons, which contributed, to the need for such a reform was the fact that the IMF was asking developing countries to bring more contributions. The developing countries agreed that if they were to do so they would demand bigger power within the financial institution.
The Treasury’s secretary recently declared that adopting this reform is crucial in order to maintain America’s solid leadership within the financial industry. Whether or not the reform is going to be approved depends on the ability of the Republican Party to make compromises and agree with Congress, which is run mostly by democrats.
This could turn out to be quite challenging if we are to take into account the recent disagreements between the two parties. The political background is more fragile than ever and it would require some time in order to heal. The IMF reform may not be considered of high priority at the moment but should it be?