Republican win could derail reforms in IMF

International Monetary Fund chief Christine Lagarde might need to get to work perfecting her belly-dance.

The normally reserved head of the global crisis lender promised in October to perform for the US Congress if that would get it to endorse crucial, much-delayed reforms for the Fund.

“I will do belly-dancing if that’s what it takes to get the US to ratify,” she said.

But now the Republican victory in Tuesday’s US elections has likely placed ratification further away, and she will have to work harder to convince the IMF’s largest shareholder.

“The change in the US political landscape is not a good omen for progress on IMF reforms,” said Eswar Prasad, a former IMF official.

Since 2012, the Obama administration has sought to convince Republicans in Congress to formally endorse the reform, decided in 2010 with US support, that doubles its financial resources and increases slightly the voting power in the IMF of emerging economies such as China, Russia and Brazil.

OPPOSITION

As the largest shareholder, the US endorsement is necessary to implement the reforms. All other major economies have ratified them already.

But the White House has repeatedly failed to get the ratification through Congress, against opposition from Republicans.

Some Republicans have said specifically they do not want to increase the influence of China and Russia in the Fund — even though the US would remain the dominant IMF power after the reforms.

That leaves the emerging economies increasingly impatient. China, the world’s second largest economy, only holds four per cent of the voting rights, barely more than Italy, whose economy is one-fifth the size.

In reaction, in July, Brazil, Russia, India, China and South Africa joined hands to create their own monetary fund for emergency needs.

They could take the opportunity at the coming G20 summit in Australia this month to pound the table over the issue, according to the Russian representative, Ms Svetlana Lukash.

“The most important thing for us is the reform of the IMF, a problem which has not yet been solved within the framework of the G20,” she said on Friday.