The 50 Years is Enough alliance of NGOs took to Washington’s streets in January to protest about US funding for the IMF and its bailout of the Asian economies.
Several US NGOs led by Friends of the Earth US, have formed an alliance with left and right wing Congressional representatives to try to stop the US government from fast-tracking the approval of up to $15billion for an increase in IMF quotas and $3.5bn for the New Arrangements to Borrow without full congressional debate. The NGOs are concerned that more money should not be handed to the IMF without requiring it to take action on social and environmental issues. “The right and left are up in arms over the IMF, and working together,” said Marijke Torfs, Friends of the Earth. In addition to opposing IMF funding one congressional representative has said that he will propose legislation to change the way the IMF is funded. He is proposing that fees should be imposed on certain transactions by international banks and other financial institutions to fund IMF programmes.
Quotas are cash pledges made by member governments which the IMF uses to fund its lending activities. A 45% quota increase was formally agreed by the Executive Board in January, but it may fall apart if the US government fails to secure its resources for the increase.
The new agreement will raise IMF resources from $200bn to $290bn – far less than the doubling of resources requested by Michel Camdessus, Managing Director of the Fund. The recent loans to South Korea, Thailand and Indonesia, have consumed nearly half of the IMF‘s resources and it could find itself with insufficient resources to deal with future large scale crises.
Quotas govern how much a country can borrow from the IMF and the voting rights of each country. Normally a member can only borrow up to the value of its quota in any one year. Thus, an increase in quotas would enable countries to borrow more. However, these rules have already been broken: the IMF‘s loans to South Korea, Thailand and Indonesia as part each rescue package amounted to nearly 2,000%, 400% and 500% of each country’s quota respectively.
£3bn sought from UK
The UK government will provide nearly £3bn to the new IMF quotas. The funds would be taken from Bank of England reserves and would not require a parliamentary vote. NGOs have written to the Chancellor, Gordon Brown, raising concerns about the G8‘s plans to extend the powers of the IMF.
More information from the Bretton Woods Project.
