Sometimes a crisis can usefully clarify things. So it is that events in Ukraine have given new focus to the Obama administration’s long frustrated efforts to get Congress to approve the 2010 IMF quota reform package.
The package has been stalled on the Hill for many months, suffering from the inability of the administration to convincingly answer two questions from Congress. Why should we care? And even if we do care, why do we have to act now?
But events in Ukraine provide a clear and immediate answer to the question of why Capitol Hill should care about the IMF. The fund’s role here follows a familiar but compelling script for the United States. A strategically important country experiences a political and economic crisis. The United States and its allies worry about the influence of unfriendly actors in the midst of this instability and move quickly to mobilize a sizeable financial package to shore up pro-western elements in the country.
And this is where the IMF comes in. Secretary Kerry and the White House are making the most of the $1 billion in bilateral loan guarantees on offer to Ukraine, but the fact is, this amount looks pretty meager compared to the $15 billion Ukraine’s interim government is now seeking from the IMF. This is a scale of assistance that the U.S. simply can’t muster on its own. Hence, the IMF’s role as a critically important strategic partner to the U.S. and its allies becomes immediately clear.
But why does Congress have to act now on the IMF quota package? Doesn’t the IMF already have sufficient resources to support Ukraine? Perhaps, though the quota reform itself will enable the IMF to do more for Ukraine, since the country’s quota share increases.
But the more immediate question is whether the U.S. voice will resonate within the IMF at a time when the United States alone has allowed a fundamental governance reform to languish in the institution.
By virtue of being the IMF’s largest member, the United States has long enjoyed a unique ability to influence and guide the institution on issues big and small. This influence depends critically on the willingness of the IMF’s other members to follow where the US tries to lead. And as recent comments coming from G20 members attest, patience with US inaction on quota reform is wearing thin, to the degree that the U.S. can no longer count on the normal response when it seeks to lead on issues like Ukraine.
Even worse, US inaction on quota reform has created a vacuum within the IMF that Russia seems poised to exploit. President Putin has already expressed interest in working with the IMF on Ukraine, a seemingly friendly gesture that belies his underlying motivations. One of the most important issues the IMF needs to address with Ukraine is energy subsidy reform. Yet, Russia’s geostrategic interests run counter to a sound reform effort in this area. With US leadership constrained at the moment and the Europeans divided, it’s not clear that Russia’s voice on the Ukraine package will have an effective counterbalance.
The administration is now making an aggressive push for the IMF quota package as part of its response to upheaval in Ukraine. President Obama is no doubt counting on his more hawkish critics on the Hill to provide strong support for the loan guarantee. But he should also be able to count on Congress to support him on the IMF. Ukraine is just the latest example of how the IMF acts as a vital partner to US interests. It’s time for Congress to fulfill its role in the partnership.
Morris is a senior associate at the Center for Global Development and a former U.S. Treasury official.