Tuesday, February 10, 2015

News: IMF Weighs Dropping US Veto Due to Stalled Reforms

This news article appears today on Yahoo news (Rueters). The article quotes anonymous sources at the IMF as saying that they have talked about two options to to move forward (at least in part) on the 2010 reforms. A Russian Finance Minister was all for the idea in case you think Russia is ready to jump ship at the IMF. Some quotes, then some comments.

"The IMF's board last month discussed two options for moving forward on voting reforms without the United States, including a proposal under which Washington would lose its veto power at the global lender, according to three sources familiar with the proposals."
"The sources, who have seen an IMF staff paper laying out the options, said the plan would ask the United States to temporarily give up its controlling share of IMF votes, amid growing frustration with U.S. foot-dragging on reforms meant to give emerging markets more say at the institution."
"Russia and Brazil (two of the BRICS) have pushed for this idea publicly over the past year, and Russian Finance Minister Anton Siluanov on Tuesday said it could encourage the U.S. Congress to act."
"The IMF's member countries agreed in 2010 to reform the institution's voting rights, but the Obama administration has so far been unable to persuade Republicans in Congress to pass the necessary funding changes."

. . . . . .

"The board has not yet decided which of the two options to pursue, and will discuss the issue further during the April meetings of the IMF and World Bank before settling on a plan, according to people who were not authorized to speak publicly."
My added comments:

Lots of meat in this little news update. Here is a bullet point list of what we learn:

- IMF met in January and discussed at least one plan that would bypass the US veto

- Frustration is growing (OK, that's not really new)

- the plan to bypass the US veto is a "temporary" plan (however that might work)

- once again we learn that the Obama Adminstration has tried, but been unable, "to persuade the Republicans in Congress to pass the necessary funding changes"

- Russia wishes they would just go ahead and get this over with, but the plan is to "discuss the issue further during the April meetings of the IMF and World Bank"

-for some reason the sources for this story "were not authorized to speak publicly"

I can't help but notice that once again we are told that if the IMF comes up needing funding to handle some crisis and don't have it, it is because of the Republicans in Congress. Just keep that in mind. One has to wonder why whoever the sources are for this article are "not authorized to speak publicly". Perhaps because these are just early ideas being discussed with no plan yet adopted. But it's pretty clear that Russia will be just fine with staying in the IMF if these reforms get implemented one way or another. The IMF looks like it is trying very hard to make Russia and the BRICS happy by going around the US Congress if they can. Stay tuned, next episode in April.

Added note: a reminder that Jim Rickards sent this link earlier for readers to explore this topic more in depth. He views Edwin Truman as the IMF expert on this subject. Here is our earlier article on this topic with two links to Edwin Truman articles.

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