A little-noticed but ominous new front has opened in the rivalry between the United States and China for dominance at the International Monetary Fund (IMF).
On August 3, 16 US Senators wrote to United States Secretary of the Treasury Steven Mnuchin, Secretary of State Mike Pompeo, and Defense Secretary James Mattis expressing concerns about potential requests for financial assistance from the International Monetary Fund (IMF) by countries that have become overly indebted in connection with China’s sprawling infrastructure program known as the Belt and Road Initiative (BRI).
The letter, signed by two Democrats and 14 Republicans, cautioned against supporting IMF programs for countries that have gotten into financial troubles while taking advantage of what they called China’s “predatory” lending through the BRI.
Fallout from the letter, which has been endorsed by the Wall Street Journal and other conservative voices long skeptical of the IMF’s mission IS A SIGNIFICANT revelation about US unease about China’s growing influence in the Third World particularly in Africa.
The United States cannot block approval of a program for an IMF member. However, the United States can prevent the expansion of the Fund’s basic financial resources, which are derived from precommitted quota subscriptions.
Today, the IMF’s total headline financial resources are $1.4 trillion, consisting of $700 billion in quota resources and about $700 billion in potential borrowing from the New Arrangements to Borrow (NAB) ($265 billion) and bilateral borrowing arrangements ($450 billion).
However, as of the middle of August 2018, the IMF’s available resources for lending out of quota resources were reduced by lending commitments of $222 billion, its forward commitment capacity out of quota resources was estimated at only $261 billion, and resources potentially available from borrowing arrangements were $516 billion—leaving the IMF with a total lending capacity of less than $800 billion. Moreover, $450 billion of the headline $1.4 trillion consists of bilateral lending commitments that expire in 2020, and the $41 billion commitment by the United States to the NAB will expire in 2022 unless the US administration asks the Congress for its renewal.