Aug. 19 (Bloomberg) -- The U.S. blocked a proposal this month to maintain the International Monetary
Fund’s executive board in its current form as part of a push to give emerging economies more say at the
institution.
A resolution submitted to member countries to keep the 24 seats on the board of directors failed to get backing from the U.S., a Treasury Department spokeswoman said today. A vote takes place every two years to allow an exception to the original size of 20 seats. Approval from the U.S., the IMF’s largest shareholder, is needed to reach the 85 percent voting threshold required for passage.
The move will force negotiations on the composition of the board, where European countries including Belgium and the Netherlands hold nine chairs. Group of 20 leaders agreed last year to give China and other emerging economies more say through a transfer of so-called quotas from countries with disproportionate influence.
U.S. Treasury Secretary Timothy F. Geithner “supports reforming the IMF Executive Board to make it better reflect the realities of today’s global economy and ensure that the representation of emerging market and developing countries is strengthened,” Treasury spokeswoman Natalie Wyeth said in an e- mailed statement.
The IMF’s board considers issues including loans to countries, the health of their economies and assessments of government policies. Geithner in an April speech to the IMF’s steering committee said the U.S. supported a smaller board that would preserve the existing number of emerging market and developing country chairs.
‘Powerful Signal’
Eswar Prasad, a senior fellow at the Brookings Institution and a former IMF official, said the U.S.’s stance is “a very powerful signal that the emerging markets and the U.S. are now going to join forces very aggressively for this.”
Under the current organization, the four seats with the smallest weight, each representing a bloc of countries, are held by Rwanda, Argentina, India and Brazil. China, which this year passed Japan as the world’s second-largest economy, has 3.65 percent voting shares, compared with Japan’s 6.01 percent.
The failed resolution is part of process for the election of the board’s executive directors, which is due by Nov. 1. IMF spokeswoman Conny Lotze said that without an agreement the board will revert to 20 members.
“Management and staff briefed the executive board on Aug. 6, and the membership is now considering how it will proceed with the election, including whether to maintain the board at its current size,” Lotze said in an e-mailed statement.
Such a change would likely come at the expense of European countries, which have for several years opposed a reduction in their representation at the Washington-based organization that lends to countries in financial crisis.
“Governance reform at the IMF is long overdue,” Pamela Gomez, a spokeswoman for the aid group Oxfam International, said in an e-mailed statement. “ There should be fewer European seats on the board, and the U.S. power of veto must be done away with.”