THE WORLD’S 20 biggest economies are likely to agree to increase the resources of the International Monetary Fund by between $400 billion and $500 billion (€306 billion and €382 billion), rather than the $600 billion initially sought by the fund, Group of 20 officials have said.
The extra money is to give the fund, a lender of last resort to governments, more fire-power to fight the sovereign debt crisis, triggered by unsustainable policies in euro zone countries such as Greece, Portugal and Ireland.
G20 finance ministers meet next week in Washington to discuss the fund’s call for more resources as of January after the euro zone increased the size of its own crisis-fighting funds in March in response to G20 pressure.
Fund managing director Christine Lagarde said on Thursday that reaching an agreement could take time, a sign next week’s meeting may not be the last word.
But she also said the fund may not need as much money as it thought a few months ago as economic and financial risks had receded and the global lender’s funding needs were now smaller.
Officials said with the first-quarter peak of euro zone government refinancing needs already taken care of through the European Central Bank’s cheap long-term loans, or refinancing operations, the need for more IMF resources has diminished.
“I would say it will be somewhere between $400 billion and $500 billion, and it very much depends on how much the big global economies and European but non-euro zone economies, pledge,” one G20 official said.
In January, the fund estimated it would need an additional $500 billion to lend and another $100 billion for reserves to erect an adequate safeguard against the risks posed by the euro zone crisis.
“It has always been clear that the $500-$600 billion . . . was too much, not realistic,” a second G20 official said. “We would be happy if we get as much from other countries as the Europeans are willing to provide.”
Euro zone states have committed to provide €150 billion, while other EU members have pledged another $50 billion.
The first official said China and Japan might provide another $100 billion or slightly more between the two of them.
“Japan and China appear to be relatively happy with what Europe has achieved,” a third G20 official said. “But for developing economies, there’s still a strong sense that rich members like Germany should play a bigger role in fixing the region’s problems. There might not be a deal until the last minute.” – (Reuters)
