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The Senate gave final approval to a $1.1-trillion spending bill for the current fiscal year, leaving behind what might have been the Obama administration’s best chance to overhaul the International Monetary Fund (IMF) and meet its obligations to the world’s other economic powers.
Administration officials concede that Congress’ decision not to make the changes will be an embarrassment to President Barack Obama internationally, undermining future efforts to reach global economic accords. But congressional Republicans would not budge from their refusal to cede some control of the fund to China, India, Brazil and other emerging economic powers.
The 1,582-page spending plan was cleared on Thursday by the Senate overwhelmingly, 72 to 26, with no mention of the monetary fund omission. Obama has promised to sign the plan into law.
The structural changes to the fund have languished since Obama agreed to the “rebalancing” with great fanfare at the G-20 meeting in Seoul, South Korea, in 2010. Powers like China have chafed at their status as junior partners at the monetary fund, even as they become major international lenders.
In response, the world’s largest economies agreed to give up some of their authority at the fund — the international lender of last resort — to democratise the institution and head off efforts by China to create alternative funding sources.
“I have made no secret of the fact that I think it’s critical for us to finalise the ratification,” treasury secretary Jacob Lew said on Thursday at the Council on Foreign Relations. “We made a full-court press to get it done and got close, but didn’t get it done this past week. We are continuing to stand by our commitment, and we will get it done.”
Under the agreement, the US was required to shift $63 billion from the IMF’s crisis fund to its general accounts, where a newly rebalanced board of directors would have more control. China would become the fund’s third-largest member, and Western Europe’s traditional dominance would wane.
Since the 2010 accord, every nation involved but the US has ratified it. But the US remains the monetary fund’s largest contributor, and without Congress’s approval, the restructuring cannot happen. The operational cost of reconfiguring the governance might have reached $315 million, a tiny part of the budget.