IMF's Plan B for stalled reform

Want China Times, Staff Reporter 2015-04-28

IMF vice president Zhu Min speaks at the Summer Davos Forum in
Tianjin, September 2014. (File photo/CNS)

The International Monetary Fund's plan to sidestep the United States in its reform to increase the influence of developing countries is set to make China the country with the third-largest voting power in the organization, according to Shanghai's China Business News.

IMF deputy managing director Zhu Min stated after the 2015 Spring Meetings of the World Bank Group and the IMF April 20 that the fund had already adopted a Plan B, since it can no longer wait for US congressional approval for its proposed reforms.

The reform, which is aimed at giving more voting power to emerging economies, was passed by IMF member countries in 2010, but requires Congress's approval because the plan involves funding changes.

Currently, the US has 17.9% of the total voting share and is the only member that enjoys the right to veto, while half of the voting rights are controlled by developed countries.

Under the proposal, China is set to see its voting share rise from 3.994% to 6.390%, while the US will have 16.75% and Japan will have 6.98%, according to the report.

Despite the support of President Barack Obama, the Republican-controlled Congress has been blocking the IMF reform proposal, said Ou Yongming, a researcher at Renmin University of China in Beijing.

Ou said the proposal is unlikely to be passed before a Republican wins the White House or the Democrats regain control of Congress.

According to Qiao Yide, vice chairman and secretary-general of the Shanghai Development Research Foundation, IMF chief Christine Lagarde hinted at two possible options for the so-called Plan B during a recent visit to China.

To get around the required US approval, the IMF might decide to not double the total quota — the principal source of the fund's financial resources — and just move 6% in quota share from European countries to developing countries, Qiao said.

The other option Lagarde divulged, according to Qiao, involves an ad hoc increase that will allow developing countries to see a bump in their quotas without affecting the US quota.

"The U.S. will not abandon the IMF, which is a multilateral organization. But what is worth noting is that the US will not change the status quo unless the country faces great pressure," Qiao said.

If the IMF reforms fail to go through, it will spur other countries' efforts to establish another multilateral organization outside the fund, such as the China-led Asian Infrastructure Investment Bank, Qiao added.

President Joko Widodo, center, chats with Chinese President Xi Jinping, left, as

 Japanese Prime Minister Shinzo Abe, right, looks on at the opening of the

60th Asian-African Conference in Jakarta on Wednesday. (AACC2015/Prasetyo Utomo)

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