Washington, 19 December 1997 (RFE/RL) -- The United States and Germany have successfully blocked a proposal by the head of the International Monetary Fund to increase the IMF's capital base -- the member governments' quotas -- by around 70 percent.
IMF Managing Director Michel Camdessus proposed to the fund's board of executive directors yesterday that the quota increase of 45 percent approved at the IMF's annual meetings in Hong Kong be raised to just over 70 percent.
He argued that because of the financial crisis that has rocked southeast Asia over the past few months -- requiring the IMF to put together huge financial rescue packages for Thailand, Indonesia and South Korea -- it would be a logical point to raise the fund's basic resources.
But the United States, which has 18 percent of the voting power in the IMF, and Germany, which has nearly six percent, led several other countries in saying the 45 percent increase was adequate for the foreseeable future. A quota increase requires approval by 85 percent of the fund's membership, including ratification by national parliaments, so the U.S. can block major changes.
Each of the 181 member nations of the IMF has a kind of membership fee called a quota. It is determined by the size of the country's economy and determines its voting power in the fund, the amount it can borrow, and most importantly the amount of money it is required to deposit for the fund's operations.
At the annual meetings in Hong Kong, the IMF's governors approved a quota increase of 45 percent. Camdessus had been pushing for a much larger increase, saying that with the size of the global economy continuing to grow larger every day, the fund needed more resources to do its jobs, especially in an emergency.
The U.S. and some other countries had opposed Camdessus's bid for additional funds, but finally agreed to the 45 percent compromise, which will add about 100,000 million dollars to the IMF capital base.
Camdessus told the fund's executive directors yesterday that the Asian financial crisis had brought a "new reality" to the global economy and that this was a "window of opportunity" to change the rate of increase of quotas from 45 percent to around 70 percent.
"It's true we have no immediate need of added liquidity," Camdessus told reporters last night, but it was his responsibility to "record the real situation and transparently to say that things have changed since Hong Kong -- something that is obvious."
However, Camdessus said, the U.S., Germany and others refused to change the size of the increase. "It happens that the U.S. and several other countries prefer to stick to the 45 percent now, taking the risk that the next quota increase won't be as traditionally in five or six years, but within a much shorter lapse of time," he said.
Russia, with a nearly three percent voting power, has not stated publicly its position on a greater quota increase, but it has generally supported the higher levels.
Camdessus shrugged his shoulders after the defeat yesterday. The national representatives "must observe what is the political setting, the political framework in which this decision must be taken," he said. As for the fund's staff leadership, he said, "we will await the moment when they will be ready."