Impasse at the IMF

TheSpring Meetingsin the IMF and the World Bank are fast approaching. Once again, member countries are compelled to discuss ways to overcome the longstanding gridlock in IMF governance reforms. Professor Robert Wade (LSE and DIIS) and Senior Researcher Jakob Vestergaard (DIIS) provide an up-to-date account of the increasingly desperate situation, and its longer-term geopolitical implications, in a featured article in the latest issue of theBretton Woods Observer:

The Eurozone crisis is resurfacing, and Bank for International Settlement officials are saying that some emerging markets and developing counties (EMDCs) are now as vulnerable as East Asian countries in the mid 1990s. In this situation, the International Monetary Fund (IMF) faces an acute shortage of secure lending resources -- secure in the sense of not depending on the willingness of non-crisis countries to lend to it short-term.

The main reason is that the US Congress is blocking ratification of an agreement by all member states that would almost double the Fund’s permanent lending resources, and give some developing countries a significantly higher share of votes than hitherto. The Fund’s permanent lending resources are the total of its members’ “quota”. Without an increase in total quota the organization currently relies on the good will of countries to increase its fire-power by lending to it on a short term basis. This is not a solid foundation for the world’s main lender of last resort to governments.

For the full analysis, visit the Bretton Woods Project website where the article is availableonline, or download it from the right hand menu.