Janet Yellen Expects “Equi-Proportional” Increase in IMF Funding to Succeed
Yellen Optimistic About IMF Funding Increase
U.S. Treasury Secretary Janet Yellen expressed confidence that her plan for an “equi-proportional” increase in International Monetary Fund (IMF) lending resources will be successful. Despite concerns raised by China, Yellen believes the plan is “pretty likely to get done.” She shared her optimism in an interview on the sidelines of the IMF and World Bank annual meetings in Marrakech, Morocco.
Desire for Enhanced IMF Resources
Yellen emphasized the desire to strengthen the IMF’s lending power by increasing its quota-based resources and reducing reliance on borrowing arrangements. The U.S.-backed plan involves each IMF member country contributing in proportion to their current shareholdings. This approach aims to boost the Fund’s lending capacity. Decisions regarding the redistribution of the IMF’s shareholding formula will be made at a later date.
China’s Concerns and Yellen’s Response
China, along with other emerging economies such as Brazil and India, has been advocating for increased shares and influence within the IMF. However, the current plan would require these countries to wait for such adjustments. Yellen acknowledged China’s view that its size and global economic role warrant a larger quota share. However, she stressed the need for a revised formula rather than an ad-hoc realignment of quota shares.
Political Challenges and Alternative Solutions
The U.S. contribution to the IMF’s quota increase would require approval from the U.S. Congress. Given the prevailing anti-China sentiment in Congress, the Treasury’s plan aims to avoid a contentious political battle. Indian Finance Minister Nirmala Sitharaman expressed support for the U.S. plan as an “immediate, temporary solution” to address the pressing need for increased IMF funding.
Shareholding Adjustments and IMF Credibility
While the “money-now, shares later” plan has gained support among IMF shareholders, IMF Managing Director Kristalina Georgieva has called for a deadline to adjust the shareholding structure. This adjustment would give more weight to large emerging market economies. British Finance Minister Jeremy Hunt expressed confidence in the success of the U.S. plan but emphasized the importance of ensuring the IMF’s credibility through shareholding adjustments.
Overall, Janet Yellen’s optimistic outlook and the support received for the “equi-proportional” increase in IMF funding indicate potential progress in strengthening the IMF’s lending resources. The plan’s success would offer a significant boost to the IMF’s ability to respond to global economic challenges and crises.