MARRAKECH: International Monetary Fund countries on Saturday failed to agree on a US-backed plan to boost IMF funding without giving more shares to China and other big emerging markets, but pledged a “meaningful increase” in lending resources by year-end.
As IMF and World Bank annual meetings in Morocco closed, a statement from IMF’s steering committee chair called for new quota contributions that would “at least maintain the Fund’s current resource envelope” as $185 billion worth of bilateral borrowing arrangements expire.
Quotas, contributed by member countries in proportion to their shareholding, make up only about 40 percent of the IMF’s roughly $1 trillion in lending firepower, and the Fund says a larger proportion of quotas would provide more lending certainty as economic shocks grow.
CHINA PUSHBACK
The US Treasury plan for countries to contribute new quota funds in proportion to their current shareholdings — unchanged since 2010 — had won support from G7 countries, India and a number of other emerging markets.
China, whose economy is now three times the size it was in 2010, continued to push for more IMF shares. People’s Bank of China Governor Pan Gongsheng said in a statement to the IMFC meeting that Beijing wanted both a quota increase and a realignment of shares “to reflect members’ relative weights in the global economy, and strengthen the voice and representation of emerging markets and developing countries.”
IMFC members agreed to add a third IMF Executive Board chair to represent African countries, a key sweetener for the US “equi-proportional quota plan. Pan said China supported this move but it was a separate issue from the shareholding formula.
The IMFC chair’s statement left the door open to a possible adoption of the US money now-shares later plan, noting that “transitional arrangements” may be needed. It also called for the IMF’s Executive Board to propose options for changes to the shareholding formula by June 2025.
This would accelerate the next five-year review of quotas and meet IMF Managing Director Kristalina Georgieva’s call for a deadline on adjusting its shareholding to preserve its credibility.
A US Treasury official told reporters that despite no firm agreement, there was good progress on the quota issue, with countries talking through their positions and a deal “increasingly likely” by October.
WAR CLOUDS
Forging a deal to boost the IMF’s $1 trillion in lending firepower to enable it to respond to another large-scale economic crisis was one of the biggest tasks for Georgieva at the meetings in the desert tourist hub of Marrakech overshadowed somewhat.
The IMFC’s chair, Spanish Economy Minister Nadia Calvino, said members were again unable to reach consensus on a joint communique amid disagreements over conflict language, despite many member countries condemning both Russia’s invasion of Ukraine and the killing of civilians in both Israel and Gaza.
But the week was overshadowed by the growing conflict between Israel and Gaza, and Georgieva closed the event with an ominous warning that it was adding to global economic uncertainty.
“I can say the shock people have felt, it came in our meetings,” Georgieva said, noting that these sentiments shifted from attacks on “innocent civilians” in Israel to "the necessity to now find ways to prevent the loss of civilian lives in Gaza.”
“What we see, of course, is a recognition that this is yet another source of uncertainty,” she said, adding that much would depend on its scope and duration.
The World Bank’s governing body also was unable to issue a joint communique, though it noted in a statement Development Committee Chair UAE that “most members” supported G20 leaders’ language on the war in Ukraine.
The Development Committee formally endorsed the World Bank’s new vision “to create a world free of poverty on a livable planet,” aimed at expanding its mission to climate change, pandemics, fragile states and other global challenges.
