Sunday, March 16, 2014

Battle over IMF Reforms and Funding goes on

Here is the latest on this important issue which has now become tied to the Ukraine. The full Senate will not vote on this bill until after their Spring recess. This battle is shaping up to be the US House Republicans versus everyone else. Expect continued pressure on them to pass it. Will they hold out or concede on this?

Here are some quotes from the article:

"The White House defended its decision to attach an IMF reform bid to a $1 billion aid bill for Ukraine, which has angered some Republicans and slowed the measure's passage in Congress.

The bill has cleared a Senate committee but will not come up in the Senate until after next week's recess, and its prospects in the House of Representatives remain uncertain."
"Some Republicans have accused the White House of using the wide support for aiding Ukraine as a way of forcing through the reforms to the IMF on which there is less of a consensus."
"Republican House Speaker John Boehner said on Thursday that the IMF quota reform was a separate issue from aid to Ukraine and could cause problems for the legislation in his chamber."
"This IMF money isn't necessary for dealing with this Ukraine crisis that we see today," Boehner said.
"The United States is by far the IMF's largest stakeholder and its refusal to approve the reforms have essentially blocked them."
"The measure would dramatically boost the US quota by shifting $63 billion from an existing credit line."
"Some Republicans however argue that the changes to the organization of the IMF would do little to address what they see as a surfeit of European members on the fund's board."

my comments: 
We have noted that these IMF reforms have already been approved by the other memeber nations. The IMF and Putin and the Obama Administration all want them passed. Putin has said he will work with the IMF to resolve the Ukraine and Russia has urged the IMF to move ahead with the reforms if the US refuses to approve them. 
We continue to believe that the Ukraine may turn out to be more about this reform package than anything else longer term. The big increase in IMF funding along with the voting reforms will make it easier for the IMF to move towards becoming a global lender of last resort and support the introduction of a new global currency if the need arises due to another global financial crisis. This is what we will keep an eye on here.
Let's see if the Ukraine builds into a bigger and bigger crisis with the IMF seen as the entity to negotiate a settlement. Will the US House of Reps hold out against the reform package if the perception is that refusal will lead to major conflict in the Ukraine? If they do hold out, will the IMF move to pass the reforms without US approval? Finally, why are the IMF reforms viewed as so important? There has to be some reason.

No comments:

Post a Comment