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Obama's arrival shifts US view of IMF
AFP - Saturday, March 14
WASHINGTON (AFP) - - A US proposal to substantially raise the IMF's resources signals a strong move in Washington toward multilateralism by the Obama administration in the face of the global economic crisis.
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US Treasury Secretary Timothy Geithner on Wednesday said he would recommend to the Group of 20 leading nations that they support "substantially increasing emergency IMF resources," and called for them to lend to countries hit hard by the crisis.
According to his proposal, the New Arrangements to Borrow (NAB) of the International Monetary Fund "could be increased by up to 500 billion dollars and membership could be enlarged to include more G20 countries."
The NAB, funded by 26 nations, was created in 1995 after the Mexican financial crisis. It has only been activated once, to finance a loan for Brazil in December 1998. The NAB currently has approximately 33 billion dollars available.
While the United States, the largest US stakeholder, has long balked at boosting IMF coffers, Geithner's proposal is even more ambitious than that of the Europeans, who want to raise the NAB to 250 billion dollars.
"It reflects his understanding that the IMF is very likely to need to support many more countries as the global economic crisis deepens," said Desmond Lachman, an economist at the American Enterprise Institute, a think tank in Washington.
If Geithner's proposal is adopted, the United States, which represents a 20 percent share of NAB contributions, could lend up to 100 billion dollars to the program.
That would equal Japan's 100-billion-dollar bilateral loan to the IMF pledged in February.
To prepare for the G20 summit in London on April 2, Obama has enlisted a fervent IMF supporter, economist Ted Truman, a former Treasury and Federal Reserve official and author of the 2006 book "Reforming the IMF for the 21st Century."
Before his temporary appointment at Treasury, Truman wrote in January that the IMF's adaptation to the new global economic order and the crisis was "the strategic decision that the Obama administration is going to have to make."
The IMF welcomed the Geithner proposal as "a very positive step toward assuring the global financial system that the IMF has the appropriate level of resources to meeting the needs of its members."
While the headquarters of the 185-nation institution is located near the Treasury Department and the White House, in recent years the US administration has been largely disengaged.
"The US is taking a much more multilateral approach than under the Bush administration but this seems to be motivated as much by a desire to share burdens as by a desire to work cooperatively," said Daniel Bradlow, a law professor at American University in Washington.
The IMF also has plenty of critics in the country among non-governmental organizations (NGOs) and liberal economists.
"No new money should flow to or through the IMF without the achievement first of significant, verifiable changes in Fund policy," said Robert Weissman, the head of Essential Action, a group that campaigns for corporate accountability.
Mark Weisbrot, an economist at the Center for Economic and Policy Research, said: "The increase in funding is important and necessary, but the IMF should be prohibited from attaching conditions to any lending."
Weisbrot said the IMF's conditions for economic belt-tightening and higher interest rates in the past had done more harm than good.
"As for the relationship between the IMF and the United States, I do not see any significant change," he said.
"The US Treasury Department still has the overwhelmingly dominant voice in the IMF, with Europe, Japan, and other high-income countries having a very minor role and almost never challenging Treasury on an issue of importance."
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US President Barack Obama speaks to attendees at the Business Roundtable at a hotel in Washington, DC, March 12. A US proposal to substantially raise the IMF's resources signals a strong move in Washington toward multilateralism by the Obama administration in the face of the global economic crisis.
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