Wednesday morning in Washington, Republican and Democratic Party members of the US Congress announced agreement on an omnibus spending bill that included a provision to legally enact reforms to the International Monetary Fund (IMF) agreed by the Obama Administration in 2010, according to a report by AFP.

"We take note of the inclusion in the bill of language that would authorize the IMF's 2010 Quota and Governance Reforms by the US Congress. We look forward to the outcome of the legislative process," IMF spokesman Gerry Rice said in a statement.

The reforms, which could not take effect until they'd been ratified by Congress, will increase the share of IMF voting rights assigned to some of the world's most powerful economies, including China. However, the USA, Europe and Japan will continue to dominate the Fund.

A doubling of the IMF's capital base is also part of the package. It will enable the IMF to increase the scope of its emergency lending.

IMF role in US hegemony

The IMF is the lender of last resort for countries that run into solvency problems. It was set up in 1945, alongside the World Bank, Asian Development Bank (ADB) and other institutions, as part of the US-dominated post-war international economic governance system.

Republican congressmen, unwilling to accept any decrease in the relative influence of the US, had blocked the 2010 reforms for five years, much to the frustration of IMF Managing Director Christine Lagarde and other IMF officials.

After years of waiting for Congress to implement the 2010 deal, China lost patience. It recently began setting up new multilateral financial institutions dominated by Beijing. One of these was the AIIB, the Asian Infrastructure Investment Bank, which will serve as an alternative to the World Bank and the ADB.

Other Beijing-led new multilateral institutions include a BRICS development bank, the Free Trade Area of the Asia-Pacific, the Silk Road Fund, and the Shanghai Cooperation Organization (SCO). The SCO is to get its own development bank.

China's growing role

Another sign that China's weight in the global economy can no longer be ignored is the yuan's inclusion, at the end of November, in an IMF-managed basket of currencies called "Strategic Drawing Rights" (SDRs). SDRs are in effect a synthetic currency made up of several of the world's major currencies, including the dollar, euro, yen, pound, and now also the yuan.

nz/hg (AFP, IMF)