Sun April 13, 2014
Frustrated With Congress, IMF Heads Leave D.C. With Budding Idea
Originally published on Sun April 13, 2014 9:41 am
As far as looks go, Washington turned in a dazzling performance as host city for this past week's meetings at the International Monetary Fund and World Bank.
Cherry blossoms peaked, tulips popped, and the air carried the sweet scent of hyacinths.
But politics-wise, Washington let down its global guests. They came begging Congress to approve a package of IMF reforms, but are leaving Sunday with nothing.
"We are all very disappointed by the ongoing failure to bring these reforms to conclusion," Australia's Treasurer Joe Hockey told reporters.
The week-long meetings of finance ministers and central bank governors from around the world conclude on Sunday. The global leaders have taken every opportunity to express their frustrations with the U.S. failure to ratify the 2010 agreement to reform the IMF.
On Saturday, they suggested the IMF would turn to other options if Congress doesn't act by year's end. Without going into specifics, Sinapore's finance minister Tharman Shanmugaratnam said that figuring out a way to enact IMF reforms without Congress' approval would be possible, though less desirable.
Such a move, coming early in 2015, would reduce American influence in the global economy, he said. That outcome would cause a "a disruption in the multilateral system" and leave the world less safe, he added. Given that outlook, he said he still believes Congress will act before year's end.
More than 130 of the 188 member countries already have approved the proposed changes. But the United States is the IMF's most powerful member, and its sign-off is needed to move forward. The reforms would give a bigger voice to emerging markets, such as China and Brazil.
President Obama vigorously supports the adjustments. At the IMF gathering, Treasury Secretary Jack Lew called the IMF "indispensable" and said the administration "will continue to work with Congress to get legislation passed this year."
But Republicans have blocked implementation because they are worried the changes would reduce U.S. influence at the IMF, and object to helping pay for the changes. The Congressional Budget Office estimates the cost of implementation at roughly $315 million.
"Many Americans question the wisdom of supporting the IMF and other multilateral financial institutions that take their hard-earned dollars and use them to bail out other countries," House Financial Services Committee Chairman Jeb Hensarling said in December during a hearing.
In their official communiqué, global finance ministers said they were "deeply disappointed" by congressional inaction.
The IMF's purpose is to lend money and provide guidance to promote global economic growth. In fact, it has set the ambitious goal of increasing the global economy by $2 trillion over the next five years.
At Saturday's press briefing, IMF Managing Director Christine Lagarde expressed optimism about growth, noting that even in very depressed countries such as Greece, economists are seeing signs of life. "My hope is that confidence is coming back," she said.
Since the 2008 financial crisis, the IMF has loaned billions to troubled countries, such as Greece, Portugal and Ireland, to help stabilize those government and markets.
Now the IMF is playing a crucial role again as it puts the finishing touches on a bailout package worth up to $18 billion to help Ukraine. Lagarde said the deal should be completed by the end of April.
Work on the package was being done even as tensions were rising between Ukraine and Russia. On Sunday, a Ukraine's interim government reported one security officer killed in a clash in the eastern city of Slovyansk.
Russia has alienated itself from Western countries by annexing Ukraine's Crimean peninsula. In addition, it is raising natural gas prices for Ukrainians and saying it wants Kiev to make good on billions in unpaid gas bills.