G20 gives US ultimatum over IMF reform

The G20 has given an ultimatum to the US to pass reforms to the International Monetary Fund or risk being left out of new changes.

Finance ministers in Washington for the spring meetings of the IMF and World Bank said they were "deeply disappointed" by failure to implement changes agreed in 2010, and gave the US until the end of the year to do so.

The communique highlights how growing frustration with the US for holding up reform is threatening its economic influence and predominance at the institution which governs the global financial system.

"We are committed to maintaining a strong and adequately resourced IMF," says the communique. "If the 2010 reforms are not ratified by year-end, we will call on the IMF to build on its existing work and develop options for next steps."

The US is the sole roadblock to completing the IMF reforms. The Obama administration supports the changes but has been unwilling to meet the high political price demanded by Republicans to get them through Congress.

The changes would double the IMF's quota - in effect its equity capital - to $720bn; shift six percentage points of total quota to emerging markets; and move two of the 24 IMF directorships from European to developing countries.

Despite the ultimatum, it is not clear what next steps the G20 could take, since the US has a blocking minority of votes at the fund - which is the reason its inaction has delayed the reforms in the first place.

Emerging markets have grown more and more frustrated, as their current quota does not represent their growing weight in the world and economy, and they believe the IMF was too ready to offer loans to eurozone countries on terms that would not have been extended to poorer nations.

Otherwise, the G20 finance ministers agreed little of substance, mainly repeating a call for structural reforms and investment to promote growth.

The communique says the G20 is "committed to developing new actions" that "lift and rebalance global demand and achieve exchange rate flexibility". However, it does not single out any issue such as renewed currency intervention in China, and emerging current account surplus, or emerging market concerns about the US Federal Reserve's exit from easy monetary policy.

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