In a budget agreement reached this month, the U.S. Congress declined to approve a package of reforms for the International Monetary Fund (IMF) that the fund’s members agreed to four years ago. In an email interview, Daniel McDowell, assistant professor of political science in the Maxwell School at Syracuse University, explained the state of efforts to reform the IMF.
WPR: What has been the recent state of efforts to reform the IMF?
Daniel McDowell: In a word, stalled. The most recent push for reform began within months of the onset of the 2008 global financial crisis. The crisis revealed that the fund’s resources were far too small to deal with systemic crises in today’s massive global financial system. In an effort to bolster the IMF’s ability to deal with the European debt crisis and potential future instability, the fund asked its major shareholders for short-term loans. Meanwhile, it began the process of formally reforming fund quotas (each member country’s financial contribution to the organization) as well as the nature of the executive board (the institution’s key decision-making body). The U.S. was the driving force behind these reform efforts. In December 2010, an agreement was reached that would permanently double fund resources to $720 billion and make all 24 executive director positions on the board elected. Historically, five countries—France, Germany, Japan, the U.K. and the U.S.—have had the right to appoint directors, ostensibly crowding out representatives from other countries. The initial ratification deadline for these reforms was October 2012. While the vast majority of member countries signed off on the changes by that date, the reforms have repeatedly run into problems in the U.S. Congress. Multiple requests to Congress by the U.S. Treasury to pass the reforms have failed to produce results.