When Christine Lagarde, head of the International Monetary Fund (IMF), said in June that she would not be surprised if the lender's headquarters may one day move to Beijing from Washington, the remarks were largely read as her approval of the Chinese economy, and the frustration with the U.S. failure to ratify the IMF quota reform which aims to give emerging economies a bigger say they deserve.
On July 15, Brazil, Russia, India, China and South Africa, together known as BRICS countries, agreed to set up a development bank and a contingency reserve arrangement, ushering in a long-awaited alternative to the Western-dominated institutions in global finance.
At a media roundtable on Tuesday, Lagarde underlined that there is no link between the BRICS move with the stalled IMF quota reform.
But she also said that with the shifting balance of power, there is a need for different layers in global financial safety nets, adding that she is happy to see cooperation and coordination moving forward among pillars of the nets.
To reflect the growing and underrepresented influence of the emerging economies, the IMF quota reform calls for a 6-percent shift in quota share to emerging economies. It will lift China, which still has less voting power than the Benelux countries (Belgium, the Netherlands and Luxembourg), to the third-largest shareholder. Shares for Russia, India and Brazil will also grow.
The reform, however, has been delayed for four years as it is blocked by the U.S. Congress, which retains a veto.
"The U.S. Congress' failure to ratify the quota reform undermines the credibility of the institution," Lagarde said Tuesday.
She was tormented by this issue since the beginning of the year. At the IMF's spring meeting in April, she even hinted a "Plan B" if the United States fails to endorse the reform by the end of the year.
Despite the frustration, Lagarde has been working hard to keep the 188-member organization away from the negative impacts of the stalled reform. But the emerging economies would not give up their pursuit for a more equitable global financial order for that reason.
Lagarde said the IMF should cooperate with the new BRICS development bank.
"The balance of power has been changing. There are confrontations, economic powers emerging and consolidating and cooperating ... The world is becoming both global and interdependent and needs probably different layers in that safety nets," she told reporters at the roundtable.
"But I don't see anything that is inconsistent with the mission of the IMF. Cooperation and coordination among those pillars of the international safety nets of which the IMF is a central piece is critically going forward. IMF might devote further, and I find that terribly exciting for the future," she added.
This July marks Lagarde's third anniversary as the IMF head. She has led the institution to cool the financial flames in the European countries and reposition IMF's work to climate change, income inequality and gender participation in the workforce -- issues that had not been IMF's focus of research.
"The world has changed around the IMF, and the IMF itself has changed enormously. It will continue to change, and that's one of the beauties of this institution," she said.
