Treasury's Lew presses Congress on IMF funding

Reuters News
Posted: Apr 24, 2013 1:25 PM
Treasury's Lew presses Congress on IMF funding

By Anna Yukhananov

WASHINGTON (Reuters) - Treasury Secretary Jack Lew on Wednesday urged Congress to permanently boost U.S. funding for the International Monetary Fund, saying it was essential for Washington to maintain its influence at the global lender.

The Obama administration wants Congress to shift $63 billion from an IMF crisis fund to the IMF's general accounts in order to maintain U.S. power at the international lender and make good on an international commitment made in 2010.

The request, however, has been met with skepticism from some Republicans, who see it as tantamount to approving fresh funding in a tight budget year.

"I spent much of my professional life making tough budget choices, and I can say without reservation that we must continue to invest in the IMF," Lew told a House of Representatives subcommittee.

"The IMF's balance sheet is rock solid," the former White House budget chief added, trying to allay concerns that the money could somehow be lost. He noted the IMF's assets outstrip its credits to countries in the euro zone that are deep in debt, including Greece and Cyprus.

But at a separate hearing, Republican lawmakers raised concerns about how well the IMF was helping struggling economies in Europe and the risks attached to IMF loans, suggesting Congress was in no hurry to approve any changes to U.S. contributions.

"Although this (U.S. contribution to the IMF) is often characterized as an exchange of assets ... it cannot be considered as a zero-cost or a benign contribution," said Representative John Campbell, chairman of a House subcommittee on monetary policy and trade.

Testifying before the panel, Lael Brainard, Treasury's undersecretary for international affairs, defended the safety of U.S. contributions to the Washington-based lender.

"If all the credit outstanding today were to go into default ... the reserves and the gold holdings of the IMF would be more than sufficient to completely cover all of those claims," she said. "So for that reason it is extremely hard to envisage circumstances where the U.S. taxpayer would be in any way at risk."


Congressional approval of the IMF funding changes is necessary to complete reforms at the lender that the international community has already agreed upon to boost the voting power of emerging economies. The reforms would make China the IMF's third-largest member.

The reform of the voting shares, known as quotas, cannot proceed without the United States, which holds the only controlling share of IMF votes. Under the reform, U.S. voting power would decrease slightly but it would still maintain its veto.

"There are other countries that would be happy to increase their quotas and eliminate the U.S. veto," Lew said. "So, I think it's a matter of urgency that we have these reforms ratified."

He said IMF funding helps preserve U.S. business interests, by pushing for a level playing field for U.S. companies and protects U.S. national security by promoting economic stability in fragile states that could descend into political upheaval.

Washington's foot-dragging on IMF funding came under criticism at last week's meetings of the IMF and financial officials of the Group of 20 nations.

"Frankly speaking, some of us are losing patience already. The decision of this nation is very important for all," Russia's deputy finance minister, Sergei Storchak, said last week, referring to the United States.

But U.S. lawmakers on Wednesday made no firm commitments. Representative Kay Granger, the chairwoman of a House appropriations subcommittee that deals with U.S. foreign programs, said it was unclear that U.S. support for multilateral development institutions was effective.

"Funds are more difficult to track when they go through multilateral institutions rather than through bilateral assistance programs," she said.

(Reporting by Anna Yukhananov; Editing by Tim Ahmann, Andrea Ricci and Kenneth Barry)