Failure to ratify IMF reforms to harm U.S. influence: Treasury Secretary

U.S. Treasury Secretary Jacob Lew on Tuesday warned of the risk for eroded U.S. role in international institutions if Congress failed to ratify reforms of related institutions, such as the International Monetary Fund (IMF) The United States is the only country standing in the way of the IMF reforms, adding that the reforms are the best way to maintain the U.S. leadership role in the IMF to protect the U.S. economic and national security interests, Lew said in his testimony before the House Financial Services Committee.

To reflect the growing and underrepresented influence of emerging economies, the IMF 2010 reforms call for a 6 percent shift in quota share to the emerging economies. It will lift China to the third largest shareholder. Shares for Russia, India and Brazil will also see hefty rise. The reforms, however, have been delayed for five years due to the block of the U.S. Congress as the United States retains a veto.

"As the international community waits for Congress to approve these reforms, emerging and developed economies alike are looking to other alternatives as a means of driving the global system forward," said Lew.

The U.S. runs the risk of seeing its preeminent role in these institutions eroded, especially as others are establishing new and parallel financial institutions, the secretary warned.

Twenty-one countries including China, India and Singapore signed a Memorandum of Understanding in Beijing in October last year to build the Asian Infrastructure Investment Bank (AIIB), an international financial institution aiming to provide support to infrastructure projects in Asia. Western countries, including Britain, France, Italy and Germany, were applying to join the bank.

In regard to the AIIB, Lew said that the issue about the AIIB is an important one, as there are vast needs in Asia and many parts of the world for infrastructure investment.

The U.S. concern is whether the new investment institution will adhere to the kinds of high standards that the international financial institutions have developed, he added. Enditem