Obama’s budget and the International Monetary Fund

Obama’s budget and the International Monetary Fund

The Obama administration’s just released budget includes something that close observers of the International Monetary Fund have long awaited. It requests a transfer of funds necessary for the United States to implement the 2010 reform package. That deal was designed both to expand fund resources and to shift some voting power toward emerging powers. It hasn’t gone into effect yet — in large part because Washington hasn’t done its homework. Just last month, Congressional appropriators rejected an administration request to take the necessary steps. 

When the IMF reform deal was struck in 2010, it was touted as an important step in adjusting the world’s institutional architecture to new realities. The reform would, for example, make China the fund’s third largest shareholder. Unsurprisingly, the administration is not advertising that fact to Congress. In fact, the budget narrative frames the measure almost entirely as an exercise in maintaining U.S. privileges:  

The Budget includes provisions to implement the December 2010 IMF agreement by increasing the U.S. quota in the IMF by approximately $63 billion and simultaneously reducing by an equal amount U.S. participation in the New Arrangements to Borrow (NAB), in addition to instituting other reforms that the United States has sought.  The NAB is a set of standing IMF borrowing arrangements with 38 members and institutions to supplement IMF resources as needed to respond to financial crises that threaten the stability of the global financial system.  The 2010 agreement results in no overall change in U.S. financial participation in the IMF, while preserving U.S. veto power and restoring the primacy of the IMF’s quota-based capital structure in which the United States has the largest share.

Because the United States is shifting funds from an already existing IMF credit line to its new quota, the move isn’t really a new expenditure. Nancy Birdsall of the Center for Global Development explains the technicalities here:

Here’s the short version of why this won’t cost American tax payers any new money: In 2009 the United States committed $100 billion to a special fund at the IMF to help stave off panic in global markets following the Lehman Brothers crash. The United States can participate in the quota increase by simply shifting $65 billion from the special fund into the formal, permanent IMF quota reserves. The result: while most other members are making new commitments to double their quotas, the US retains its current proportionate "quota share" at no cost.

As this Bloomberg story documents, however, even this seemingly minor request faces plenty of skepticism on Capitol Hill:

The timing of the request, which would implement a global agreement that would double the IMF’s lending capacity to $717 billion, is less than ideal as Congress grapples with the effects of automatic spending cuts known as sequestration. What’s more, the IMF needs new champions on Capitol Hill after the departure of two longtime supporters, Republican Senator Richard Lugar and Democratic Representative Barney Frank.