A former senior U.S. Treasury development adviser said on Wednesday that as a condition of modifications to the International Monetary Fund’s shareholding formula, the U.S. should insist that China fund debt restructuring for struggling poor and middle-income nations.
According to Nancy Lee, a former deputy assistant Treasury secretary who now works for the Centre for Global Development think tank, it is “reasonable” to demand that any country receiving a larger quota, or shareholding, in the IMF should also support countries in getting back to sustainable debt.
China, the largest sovereign creditor in the world, has been a barrier to debt reduction, according to U.S. Treasury Secretary Janet Yellen. China is reportedly unlikely to accept loan losses unless multilateral development banks and creditors in the private sector agree to do the same, according to U.S. officials.
IMF member nations will review the ownership structure of the crisis lender at their annual meetings in Morocco the following week.
This is their first opportunity to gain a larger stake since 2010, and major emerging market nations like China, India, and Brazil have long desired increased voting power in the institution.
Instead, the U.S. is urging IMF members to agree to increase their financial contributions in order to strengthen their ability to lend, while maintaining the current structure of shareholdings, which is overwhelmingly controlled by the U.S.
“A country should aim to advance what the IMF goals are, which are helping countries finance growth paths and in a way that is sustainable, if it wants a larger share in the governance of the IMF,” Lee said. “It is kind of hard to make the case that they need a larger quota if a country is… not participating in that agenda,” said the author.
Lee declared that she shared the opinions held by Jay Shambaugh, the senior overseas representative for the U.S. Treasury, in a speech given last month. Requests for response from a U.S. Treasury spokeswoman were not immediately fulfilled.
Shambaugh emphasised the significance of “all countries – especially those that would see an increase in share – respecting the roles and norms of the IMF and working to strengthen the international monetary system.”
He stated that this would involve doing more to reduce debt and increase exchange rate transparency—long-standing Treasury critiques of Beijing—without specifically mentioning China.