Swaminathan S. Anklesaria Aiyar
The rules of the IMF are being bent to accommodate the fiscal needs of European countries that together dominate its shareholding. Although the IMF articles of association allow lending specifically for supporting countries’ balance of payments, the organization is not supposed to lend for fiscal support alone, and no developing country has ever received a loan to meet a purely fiscal problem, as Greece is now. Profligate Europeans may be squeezing emerging markets out of limited lending capacity. Brazil, Russia, India, and China (the “BRICs”) have all contributed to the latest expansion of IMF lending capacity, transferring significant cash to Europe. Yet this change in balance between creditors and debtors is not reflected in IMF voting shares, which must rise sharply to reflect the significance of the BRICs.
Aiyar is a research fellow at the Cato Institute’s Center for Global Liberty and Prosperity in Washington, DC.