The International Monetary Fund could be crucial providing aid in Ukraine and elsewhere, but much is on hold as the U.S. Congress blocks much needed IMF reforms.
SAO PAULO — It’s been a sad spectacle in the U.S. Congress, as the body has refused to ratify the statutes of the International Monetary Fund (IMF), which the country’s own government proposed three years ago.
All other IMF member states have already ratified the reforms, which give more power to emerging countries and double the contributions paid by the 188 member states, increasing the fund’s ability to extend credits to countries facing problems.
The IMF’s financing capacity is significant. The fund is, after all, considering a $15 billion loan to Ukraine, which would strengthen the country economically and help it fend off Russian President Vladimir Putin’s imperialist harrassment. The IMF loan is seven times bigger than the one from Europe and 15 times more than the $1 billion the United States has earmarked for the embattled Eastern European nation.
And during the financial crisis of 2008-9, the IMF practically reached its lending ceiling with the credit lines it extended to several developing countries.
Since its creation 70 years ago, the IMF has been the world’s greatest source of massive emergency funds and of rapid payments to countries facing economic or financial crisis. The IMF has allowed these countries to recover growth while returning to fiscal equilibrium, ordering their finances and curbing inflation with cautious monetary policies — everything the U.S. asks them to do. It is no coincidence that the IMF is based in Washington, DC.
In this context, the refusal by the U.S. Congress to approve IMF reforms is all the more shortsighted. The effect is that Washington’s natural allies are increasingly disinclined to back its foreign policy initiatives.
Isolationist rhetoric by the Tea Party movement, whose arguments are ignorant at best, has unfortunately taken the Republican Party hostage, while the Democrats and the Obama Administration have failed to take the issue seriously enough.
One Republican argument for opposing the IMF reforms is that the United States would lose its veto power. A 6% increase in voting power for emerging nations would come at the expense of the relative weight of European states, which would lose two seats on the fund’s board of directors. The United States would maintain its current veto right after reforms.
Another argument against the reforms is that they would increase the financial burden on U.S. taxpayers. False again: Congress allocated these funds to the IMF five years ago. They would merely go from being a temporary fund to becoming permanent resources of the IMF.
IMF chief Christine Lagarde has explained the absolute need for the reforms, even as the United States’ own allies echo the calls. Britian’s Chancellor of the Exchequer George Osborne most recently urged the American Congress to approve the reform as soon as possible.
And the time to do that is now. IMF members walked away disappointed and frustrated from last week’s annual meeting, by which point Congress still had not acted. The U.S. is abdicating its leadership role and revealing an isolationist streak. Another sign that this will not be a great American century.