A senior U.S. Treasury official expects the International Monetary Fund (IMF) to have a chief from outside Europe in the not near future.
Nathan Sheets, the U.S. undersecretary of treasury for international affairs, was talking about IMF reform on Tuesday when he was asked if IMF managing director would come from emerging economies such as China and Brazil.
"I do expect that in the not too distant future, there will be discussions of managing directors from other parts of the world. And I think that is altogether appropriate and the way it should be," he told the talk at the Center for Strategic and International Studies in Washington.
He said the discussion would seek to find the most qualified and effective people to continue to move forward in the senior leadership of the IMF.
As a tacit agreement between the U.S. and European nations, the IMF has always been headed by a European while the World Bank is presided over by an American. That has raised eyebrows over the years when emerging economies seek to have a bigger say in international financial institutions.
"My sense is very much that the managing director at the IMF must be chosen based on competence, on experience and on the broad set of qualities and attributes that person brings to the table," Sheets said, praising the current managing director Christine Lagarde, a French, as being "exceptionally effective in that position."
After a five-year delay and harsh warning from Lagarde, the U.S. Congress approved the IMF 2010 quota and governance reforms last December. The reform doubled IMF's permanent resources and gave a greater say to emerging markets and other underrepresented countries. The reforms preserved U.S. voting share.
"The 2010 reforms made important progress, but we are not finished reforming the Fund," Sheets said, adding that the U.S. is working to further modernize the IMF's system of governance and improve its capacity to deal with evolving challenges.
He said as emerging economies grow, they desire and deserve a greater stake in the institutions at the center of the global economy. "We believe that further enhancing the voice of emerging markets at the IMF is necessary
"Emerging markets comprise an increasing share of the global economy, and we should incentivize them to embrace greater responsibility to contribute to global economic prosperity through cooperative policies,"
Sheets dismissed the saying that the U.S. saw institutions such as the China-led Asian Infrastructure Investment Bank (AIIB) as a threat to U.S. influence in the international financial system.
"But we have been clear that the United States stands ready to welcome new institutions into the international architecture, provided that they share the international community's strong commitment to sound governance principles and high social and environmental standards," he said.
The U.S. government has drawn sharp criticism from both home and abroad early this year for its efforts to dissuade its allies, such as United Kingdom, Australia and South Korea, from joining the AIIB. The efforts, which failed, have been attributed by former U.S. Treasury Secretary Larry Summers as the fact that the Congress would not grant the money needed for U.S. to join AIIB.
Sheets acknowledged on Tuesday that there is huge infrastructure need in Asia. "As the AIIB takes constructive step to address that. That's good for global growth," he said.
He said that the documents that have been prepared for AIIB seem broadly in line with international standards. He also described as "encouraging signs" that the first round of AIIB projects has been either co-financed with other developing banks or have been in consultations with them.
The AIIB board meeting in late June approved $509 million in investments for four projects, including three projects co-financed with the World Bank, the Asian Development Bank, the United Kingdom Department for International Development and the European Bank for Reconstruction and Development.
The projects are to improve power grid in Bangladesh, slum renovation in Indonesia and highway construction in Tajikistan and Pakistan.
