Memo to IMF from China Daily - We are Still Waiting for IMF Reforms

By now readers here know the drill on this story. We have followed it now for about a year. The 2010 IMF reforms package that would boost IMF lending capacity and give the BRICS nations more voting power remain stalled as the US Congress has not approved them.

Here is yet another new article calling on the IMF do something about the situation. This article in China Daily prods the IMF to "Push on with IMF Reform."  Some quotes below and then a brief comment.

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"As the US Congress failed to incorporate the International Monetary Fund reform package of November 2010 into its budget legislation, the IMF quota and governance reforms are once again stalled. Christine Lagarde, managing director of the IMF, indicated in a statement in December that the board is due to meet this month to weigh "alternative options" to the four-year-old reform plan and ensure that the IMF has adequate resources."

"The IMF reforms are designed to reflect the increasing importance of emerging economies and retain the influence of smaller developing countries in the IMF. According to the reform plan, 6 percent of the quota shares of developed countries will shift to emerging economies. China's quota share will rise from the current 3.99 percent to 6.39 percent. As a result, China will become the third-largest shareholder after the United States and Japan. China's voting share will also increase from 3.65 percent to 6.07 percent and the other BRICS countries such as Russia, India and Brazil will all be in the top 10. The reforms are hailed as the "most fundamental reforms of governance" in the history of the IMF."

"In spite of the fact that the United States will not lose its unique veto power in the institution, it still feels that its dominance in the IMF is at risk and therefore has adopted procrastination tactics in an attempt to drag the reform into limbo."

. . . . . 

"More and more countries are fed up with the US dragging its feet on approving the reform package. Some members of the IMF's steering committee have indicated their desire to deprive the US of its veto power on the IMF executive board."

"The US' reticence to endorse the IMF reform plan not only indicates its lack of confidence in its future growth and inward-looking inclination, it also undermines its claim to global leadership."

"The failure to implement the reform plan has seriously affected public confidence in the IMF, making its representation, legitimacy and relevance questionable in the eyes of the international community. Therefore, it is imperative that the IMF rapidly advance the reform plan."

"The international community will closely follow the alternative reform options that the IMF comes up with later this month."

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Summary comment:

There is not much we can add on this at this point. The IMF said they will bring forward "alternative options" this month on this situation. In her recent speech to the Council on Foreign Relations, Christine Lagarge sounded less like something significant will happen. 

This China Daily article kind of has an impatient feel to it. Sort of like  -- OK, there is one week left in Janaury, we are waiting. What's your plan? We will be watching you like a hawk.

It's hard to tell what may happen on this right now. If nothing much happens in January, another "deadline" will have passed. We cover this issue because it is very clear from the comments in this article that the IMF is not in a position to take over as the global lender of last resort as things stand right now. Note this statement in the article: 

"The failure to implement the reform plan has seriously affected public confidence in the IMF, making its representation, legitimacy and relevance questionable in the eyes of the international community." 

We will continue to watch for news on this very important issue to see if there is news next week. January is almost gone. China Daily notices that also.

added note: meanwhile President Obama vows to try and get the reforms passed while on his visit to India