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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2674

U.S. Congress approval of $100 billion to IMF helps developing nations

Daya Gamage – US Bureau Asian Tribune

Washington, D.C. 21 June (Asiantribune.com): Approval by the U.S. Congress of a US$ 100 billion package of measures related to the IMF gives a big boost to international funding to combat the global economic crisis and in channeling enhanced assistance to developing countries hit by the financial turmoil.Adoption of the legislation approved by both the U.S. House and the Senate provides the U.S. administration with the necessary domestic authority to move ahead in several key areas affecting the International Monetary Fund including:

• More funding for the IMF to help tackle the global crisis under an expanded borrowing arrangement. The United States has committed to increase its credit line by up to an additional $100 billion to the IMF.

• Reform of country representation at the IMF, including greater representation (quotas) for dynamic emerging markets and enhanced voice and participation for low-income countries.

• Go-ahead for the so-called “fourth amendment,” a one-time allocation of Special Drawing Rights (SDRs), an international reserve asset created by the IMF in 1969 to supplement the official reserves of member countries.

• Providing expanded investment authority to the IMF as a key part of a new income model to finance its activities, making it less dependent on earning revenue from interest paid on loans.

• Vote on a proposal for limited gold sales by the IMF, consistent with the agreed framework for the Fund’s new income model.

The legislation also urges the use of Fund resources to leverage additional concessional assistance to low-income countries.

U.S. action key to implementing IMF reforms

IMF Managing Director Dominique Strauss-Kahn welcomed the approval by the U.S. Congress. “This is a significant step forward that will help the IMF in its efforts to respond to the global financial crisis and also to strengthen the governance and operations of the institution. The decision demonstrates the strong commitment of the United States to a well-governed and well-resourced IMF and, more broadly, to a multilateral approach to resolving global economic and financial challenges,” he said in a statement.

“It represents important progress in implementing the proposals put forward by the G-20 leaders, and the IMF looks forward to continue working with its membership to fulfill its mandate and to assist countries expeditiously and effectively in their efforts to weather the global financial crisis.”

U.S. action is critical for many of the issues related to IMF reform and enhanced funding. For several of these measures to be approved, an 85 percent majority of total voting power is needed; the United States has a voting power of 16.77 percent. In particular, this majority is needed for amendments to the IMF’s Articles of Agreement (acceptance by at least two-thirds of members accounting for at least 85 percent of total voting power) and the decision on gold sales (the IMF’s 24-member Executive Board must approve by at least 85 percent of the total voting power).

The legislation relating to the IMF was included by the U.S. Senate in the Supplemental Appropriations Act for fiscal year 2009. After conference reconciliation on June 4 by House and Senate appropriators, the final Supplemental Appropriations Act 2009, including the package of measures related to the IMF, was passed by the House on June 16 and the Senate on June 18.

- Asian Tribune -

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