International financial reform and the G20 have suffered a serious blow after the US Congress refused to ratify a capital increase for the International Monetary Fund agreed four years ago.
A $1.012 trillion budget package agreed on Monday evening left out funds for the IMF despite intense lobbying by the Treasury and the White House because of opposition from conservative Republicans in the House.
With midterm elections in the US this autumn, there is no obvious route to pass the IMF package until 2015, leaving reform of the international financial system stuck in the deep freeze.
“The delay has clearly ‘broken’ the implicit contract underpinning the G20 spirit or contract whereby advanced economies would support a greater voice for emerging economies in global governance arrangements and the latter would take more responsibility as full-fledged stakeholders of the global economy,” said Domenico Lombardi at The Centre for International Governance Innovation in Ontario, Canada.
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