WASHINGTON, March 4 (Reuters) - The United States on Tuesday sought to use the crisis in Ukraine as leverage in its effort to convince Congress to approve a long-sought measure to increase the International Monetary Fund’s financial power.
Treasury Secretary Jack Lew said Ukraine would be able to borrow more money and avert a potential default if U.S. lawmakers signed off on the measure, which would double the IMF’s resources and give countries in crisis access to a bigger pool of potential aid.
The Obama administration on Tuesday tucked a request for a shift in IMF funding into the president’s proposed budget for the 2015 fiscal year, which begins Oct. 1.
For about a year, the administration has been pushing Congress to approve a shift of some $63 billion from an IMF crisis fund to its general accounts in order to maintain Washington’s influence at the global lender, and to make good on an international commitment made in 2010.
“We are working with Congress to approve the 2010 IMF quota legislation, which would support the IMF’s capacity to lend additional resources to Ukraine, while also helping to preserve continued U.S. leadership within this important institution,” Lew said in a statement on Tuesday.
Congress must sign off on the IMF funding to complete the 2010 reforms, which give emerging markets a greater say.
The reform of the IMF’s voting shares, known as quotas, cannot proceed without the United States, which holds the only controlling share of IMF votes.
The quotas determine how much each country contributes to the IMF and how much it may borrow.
Ukraine’s quota at the IMF is now about $2.1 billion but that would increase to $3.1 billion once the 2010 reforms go through, meaning Kiev would be able to borrow more IMF money.
The White House sought to tuck the IMF legislation into a proposed $1 trillion federal spending bill in January but U.S. lawmakers failed to include it in the final version.
The administration’s requests have been met with skepticism from some Republicans, who see them as tantamount to approving fresh funding in a tight budget environment. Some lawmakers have also raised concerns about how well the IMF was helping struggling economies in Europe and the risks attached to IMF loans.
But the IMF’s importance may be getting a boost now that Ukraine is in a political and economic crisis after the ouster of its president and Russian intervention in the Crimea region.
The United States has pledged economic and technical assistance to Kiev but said its support should go alongside an IMF program, which is seen as critical to shore up Ukraine’s collapsing finances and get its economy on the right track.
Ukraine has asked the IMF for at least $15 billion to avert bankruptcy.