Finance ministers and central bank governors hope a more than $430 billion increase in resources of the International Monetary Fund will be enough to handle any fresh crisis in the euro zone.
IMF Managing Director Christine Lagarde announced the new figure at the conclusion of discussions of the G-20 major economic powers Friday. She said that some countries, including Russia, India, China and Brazil, had made private pledges but did not want to issue public commitments until they had conferred with officials in their home capitals.
But she said when the public and private commitments were combined; the total raised would exceed $430 billion, nearly doubling the IMF’s available resources to make loans to nations in trouble.
Lagarde called the fundraising a “huge effort” that would increase the current $485 billion available for loans to more than $1 trillion.
“We have the necessary tools in the toolbox and we will use this wisely,” she told reporters at a news conference wrapping up discussions of the G-20, which includes traditional economic powers such as the United States and Germany and emerging powers such as China and Brazil.
Talks continue Saturday as the policy-setting committees of the IMF and its sister institution, the World Bank, meet. The IMF helps countries with financial crises and the bank provides loans for development projects in many poor nations. Both 188-nation organizations are based in Washington.
Lagarde said the extra resources would help support global economic stability. Finance officials hope the new lending power will be a backstop should another, larger European country get into trouble in repaying government debts.
Already three European nations — Greece, Ireland and Portugal — have been forced to accept IMF rescue packages along with sizable bailout support from other nations using the euro currency. But the concern is that Spain and Italy, much larger economies, are now facing financial difficulties. If either of those nations needed rescue packages, the costs would be far higher than what has been raised so far. Showing there was not unanimity on boosting the IMF crisis arsenal, two major members, the U.S. and Canada, refused to participate in boosting its resources. They believe European countries are wealthy enough to do more.
And the four countries that did not publicly reveal their contributions — China, Russia, India and Brazil — all expressed reservations about pledging additional resources until the IMF implements a 2010 agreement to give emerging market nations more of a say in how the IMF operates.
There are doubts whether the deal to boost the voting power of China and other emerging countries can be achieved anytime soon, Associated Press reported.