Despite failing to reach a consensus on a U.S.-backed plan to expand IMF funds without giving China and other major developing markets greater shares, IMF members promised a “meaningful increase” in lending resources by year’s end.
The chair of the IMF steering committee issued a statement calling for additional quota contributions to “at least maintain the Fund’s current resource envelope” as $185 billion in bilateral borrowing agreements came to an end as the IMF and World Bank annual meetings in Morocco came to an end.
Only around 40% of the IMF’s resources are derived from quotas, which are contributed by member nations in accordance with their shareholding.
$1 trillion in force for lending
Furthermore, the Fund claims that if economic shocks increase, a higher share of quotas would offer more lending certainty.
CHINESE REACTION
India and several other developing markets, along with the G7 countries, had endorsed the U.S. Treasury plan for countries to contribute fresh quota funds in proportion to their current shareholdings, which has remained unaltered since 2010.
China persisted in demanding larger IMF shares, despite the fact that its economy has grown to three times its size since 2010. Beijing desires both a share realignment and a quota increase, according to People’s Bank of China Governor Pan Gongsheng, “to reflect members’ relative weights in the global economy, and strengthen the voice and representation of emerging markets and developing countries.”
The addition of a third IMF Executive Board chair, representing African nations, was approved by IMFC members as a major inducement for the United States’ “equi-proportional quota plan.” Pan stated that although China approved of this action, it had nothing to do with the shareholding formula.
In her remarks, the chair of the IMFC noted that “transitional arrangements” might be necessary, but she did not rule out the adoption of the U.S. money now-shares later proposal. Additionally, it mandated that by June 2025, the IMF Executive Board provide proposals for modifications to the shareholding mechanism.
This would fulfil the demands of IMF Managing Director Kristalina Georgieva and expedite the upcoming five-year review of quotas.
demand a deadline
on modifying its ownership stake in order to maintain its reputation.
Although there isn’t a clear agreement yet, there has been considerable progress on the quota issue, according to a U.S. Treasury official who told reporters that a settlement is “increasingly likely” by October.
One of Georgieva’s main responsibilities at the meetings in the desert tourism hotspot of Marrakech was to broker an agreement to increase the IMF’s $1 trillion in loan firepower so that it could respond to another major economic crisis. This task was slightly overshadowed.
Nadia Calvino, the Spanish minister of economics and chair of the International Monetary Fund (IMFC), stated that despite the fact that many member nations denounced both the killing of civilians in Israel and Gaza and Russia’s invasion of Ukraine, members were once again unable to agree on a joint communique due to differences over conflict language.
However, the escalating tension between Israel and Gaza dominated the week, and Georgieva ended the event with a dire warning that it was contributing to the uncertainties surrounding the world economy.
Georgieva remarked, “I can say the shock people have felt, it came in our meetings,” adding that the focus has changed from assaults on “innocent civilians” in Israel to “the necessity to now find ways to prevent the loss of civilian lives in Gaza.”
She stated that “what we see, of course, is a recognition that this is yet another source of uncertainty,” but that a lot will depend on its extent and length.
The World Bank’s governing board was likewise unable to release a joint statement, although it did observe in a statement from the United Arab Emirates’ Development Committee Chair that “most members” agreed with the G20 leaders’ phrasing about the conflict in Ukraine.