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G20 gives U.S. year-end deadline for IMF reforms

Source: Reuters - Fri, 11 Apr 2014 23:37 GMT
Author: Reuters
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(Adds comments from U.S., Brazil; background on monetary flows)

* Brazil wanted tougher stance over U.S. reform delays

* G20 to look at options in absence of Washington action

* G20 monitoring Ukraine crisis, but not big focus of talks

By Louise Egan and Anna Yukhananov

WASHINGTON, April 11 (Reuters) - Finance chiefs from around the globe on Friday gave the United States until year-end to ratify long-delayed reforms to the International Monetary Fund and threatened to move forward without it if it fails to do so.

The inability to proceed with giving emerging markets a more powerful voice at the IMF and shoring up the lender's resources appeared the most contentious issue for officials from the Group of 20 leading economies and the representatives for all IMF member nations who met with them.

In a final communique, G20 finance ministers and central bankers said they were "deeply disappointed" with the delay.

"I take this opportunity to urge the United States to implement these reforms as a matter of urgency," Australian Treasurer Joe Hockey told reporters on the sidelines of the IMF-World Bank spring meetings.

The reforms would double the Fund's resources and hand more IMF voting power to countries like the so-called BRICS - Brazil, Russia, India, China and South Africa.

The U.S. Congress has refused to sign off on the overhaul, which was agreed to in 2010, and the failure overshadowed even the crisis in Ukraine and the spillover effects of ultra easy monetary policies in advanced economies in the discussions.

Some Republicans have complained the changes would cost too much at a time Washington was running big budget deficits. The reforms also ran afoul of a growing isolationist trend among the party's influential Tea Party wing.

If Washington does not ratify the reforms this year, the G20 advanced and emerging economies said they would ask the IMF to develop possible next steps.

A source said Brazil had pushed for a harder line. It wanted to require the Fund to begin work now to determine options to be implemented if the United States failed to act, a notion that was floated in an early draft of the communique.

"The end of the year for me is the final limit," Guido Mantega, the Brazilian finance minister, said later through a translator. "Four years waiting for me is just too much."

U.S. ELECTIONS LOOM

There are a handful of ad hoc measures officials can take to achieve at least some of the governance overhaul for the global lender without formal U.S. approval. But Singaporean Finance Minister Tharman Shanmugaratnam, who is head of the IMF's policy committee, said it was too early to talk about alternatives.

"We have every reason to think the 2010 reforms will be passed by the U.S.," he said, adding that a failure to pass them would affect the Fund's credibility and effectiveness because, for now, it was relying on borrowed resources.

Earlier on Friday, Russian Finance Minister Anton Siluanov said developing nations may demand changes to the IMF's emergency borrowing mechanism if the United States does not approve the overhaul.

Still, giving the Americans until year-end puts the deadline beyond U.S. midterm elections in November, and some officials said the U.S. Congress would find it easier acting then.

U.S. Treasury Secretary Jack Lew said the Obama administration would do its best to push IMF quota reforms through the U.S. Congress this year. "We will keep taking steps to get this done," he said at a news conference.

UKRAINE, RUSSIA; MONETARY POLICY

The G20, which is careful to focus on economics and not politics, said it was monitoring the crisis in Ukraine for any risks to economic and financial stability.

Ukraine's economy was thrown into chaos after popular protests in Kiev ousted pro-Russian president Viktor Yanukovich, and Russia seized Ukraine's Crimea and annexed it, causing the worst standoff between Moscow and the West since the Cold War.

Despite the simmering international standoff, Australia's Hockey said there were "no tensions at all" on the issue and "goodwill" in the G20 meeting room.

"There was just recognition in the general discussion about geopolitical risks around the globe; there wasn't a specific discussion of Ukraine," said Hockey, who coordinated the meetings under Australia's G20 presidency.

Russia, a G20 member, was not specifically mentioned in the communique. The G20 source said there were no discussions of sanctions on the country, which has already been hit with U.S. and European Union sanctions.

German Finance Minister Wolfgang Schaeuble said top finance officials from the Group of Seven developed nations, who met on Thursday, were resolved to work together to defuse the crisis, and that Russia must be a part of the solution.

"We were all agreed that we must solve this problem together," he told reporters, adding that Russia must be part of the solution. "We don't want to make this difficult for Russia," he said.

Hockey said he expected Russia would attend G20 leaders summit in November.

The G20 communique did not explicitly mention monetary policy, and it dropped a reference from the group's February statement that stressed central banks should be careful in withdrawing stimulus.

Nevertheless, the nations pledged to provide "clear and timely communication" of their actions, with an eye on the global fallout as policies are "recalibrated."

The gradual withdrawal of the U.S. Federal Reserve's aggressive monetary accommodation has rocked the currencies of emerging economies like India and Argentina, as investors en masse have sought out higher-yielding markets. (Reporting by Reuters' G20/IMF team; Writing by Jonathan Spicer; Editing by Paul Simao, Tim Ahmann and Dan Burns)

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