Despite reservations voiced by China, U.S. Treasury Secretary Janet Yellen told Reuters on Friday that her plan to enhance International Monetary Fund quota-based lending resources “equi-proportionally” was “pretty likely to get done.”
On the fringes of the annual meetings of the World Bank and the IMF, Yellen was having an interview.
“There’s a desire to see the IMF well-resourced with larger quota resources and less reliance on borrowing arrangements,” Yellen stated.
In order to strengthen the Fund’s lending capacity, member nations of the IMF would each contribute to an increase in quotas in proportion to their current shareholdings under the U.S.-backed plan. How the IMF’s shareholding formula is changed would be decided upon at a later time.
China and other sizable, quickly developing emerging markets—such as Brazil and India—have been demanding greater power and shares at the crisis lender, but the present plan would force them to wait.
Yellen stated that she spoke with Pan Gongsheng, the governor of the People’s Bank of China, on Friday regarding the quota issue.
“I think they feel, based on China’s size and role in the global economy, they should have a larger quota share,” Yellen stated. “We’ve made the point that we can’t support an ad-hoc realignment of quota shares, that we believe the formula needs to be revised.”
The Treasury plan would avoid a challenging political battle, and the U.S. contribution to the quota hike would need to be approved by the U.S. Congress, where anti-Chinese sentiment is running hot.
The U.S. proposal was supported on Friday by Indian Finance Minister Nirmala Sitharaman, who described it as a “immediate, temporary solution” to the urgent need to increase IMF financing.
“It appears that the equi-proportional quota is a less controversial way to handle it,” Sitharaman stated at a Marrakech Atlantic Council event. “I from my side did openly say yes.”
IMF Managing Director Kristalina Georgieva has called for a timetable to change the organization’s shareholding structure in order to give greater weight to large emerging market economies, despite the fact that the money-now, shares later plan has been gathering momentum among IMF shareholders this week.
Jeremy Hunt, the British Finance Minister, told reporters that although he was certain the U.S. approach would work, shareholdings needed to be changed to maintain the IMF’s legitimacy.