WASHINGTON - The International Monetary Fund (IMF) has secured over $430 billion in addition to its resources, as the group of 20 advanced countries and emerging countries have pledged to beef up the Fund’s financial capacity.
In a communiqué, the G20 countries said there are firm commitments to increase resources made available to the IMF by over 430 billion dollars in addition to the quota increase under the 2010 Reform.
“These resources will be available for the whole membership of the IMF, and not earmarked for any particular region,” they noted.
The pledges came as the world economic recovery was threatened by renewed escalation of euro zone crisis, and the IMF tried to build stronger “global firewall” to tackle crisis and preserve the world economic stability.
“It really showed the resolve of international community to have available tools in the toll kit to resists and defend against the crisis,” Christine Lagarde, chief of the IMF, said at a news conference at the Fund Friday.
“This is extremely important, necessary, an expression of collective resolve,” she added, noting that the interests of creditors would be well protected.
With the over $430 billion , the IMF lending capacity almost doubled, Lagarde said in a statement, applauding the countries which have made or signaled contribution.
“This signals the strong resolve of the international community to secure global financial stability and put the world economic recovery on a sounder footing,” she added.
New pledges include 15 billion dollars from South Korea, Saudi Arabia, and Britain respectively. Lagarde said China, Russia, Brazil, India, Indonesia, Malaysia, Thailand have also indicated their interest in contribution.
Other previous commitments for the additional IMF funding arsenal include 200 billion dollars from the euro zone, 60 billion dollars from Japan, about 10 billion dollars from Sweden, 9.3 billion dollars from Norway, 7 billion dollars from Denmark, 8 billion dollars from Poland, and several other countries including Switzerland have also announced contributions.
Boosting the IMF’s resources is a hot issue at the spring meetings of the IMF and the World Bank, which officially started Friday in Washington.
The Washington-based global lender said earlier this year that it is seeking to increase its funding capacity by 500 billion dollars to meet the global potential financial needs.
As the financial strains eased recently in the European market, Lagarde said last week the Fund may not need as large additional resources as it previously thought.
However, many economists, including Olivier Blanchard, chief economist of the IMF, worries that although building a larger firewall would help stabilize market sentiment, it can’t solve the difficult fiscal, competitiveness and growth issues for some euro zone countries.
The United States, the largest shareholder of the Fund, appeared to be lukewarm on this issue. U.S. Treasury Secretary Geithner has said repeatedly that the U.S. government would not seek additional funds for the IMF to step up its firewall against the risk of European contagion, and bigger IMF role could not substitute tough reforms of the eurozone economies.
The G20 countries said in the communique that resources would be channeled through temporary bilateral loans and note purchase agreements to the IMF’s general resources account.
Should it become necessary to use these resources, adequate risk mitigation features, conditionality and burden sharing among official creditors would apply, as approved by the IMF Board.
The G20 countries also reaffirmed commitment to fully implement the 2010 Governance and Quota Reform by the 2012 IMF and World Bank Annual Meeting in Tokyo. “We reaffirm that the distribution of quotas should better reflect the relative weights of IMF members in the world economy which have changed substantially in view of strong growth in dynamic emerging markets and developing countries,” they noted.