IMF announces $430 billion to boost resources
Saturday, April 21, 2012
WASHINGTON (AP) — The International Monetary Fund says it has raised more than $430 billion in an effort to assure finance markets that it has sufficient firepower to handle any new problems from Europe’s prolonged debt crisis.
IMF Managing Director Christine Lagarde announced the new figure at the conclusion of the discussions among finance officials of the Group of 20 major economic powers on 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 in funds available for loans to a figure above $1 trillion.
“We have the necessary tools in the tool box and we will use this wisely,” she told reporters at a news conference wrapping up discussions among finance ministers and central bank governors of the G-20 countries. The group includes traditional economic powers such as the United States and Germany and emerging powers such as China and Brazil.
The United States was represented in the talks by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.
Lagarde said the extra resources would support global economic stability. Finance officials hope that the sizable increase in IMF resources will reassure financial markets that there will be a backstop should another, larger European country get into trouble in repaying its 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 economic difficulties. If either of those nations needed rescue packages, the costs would be far higher than what has been raised so far.
The fund raising effort exposed splits inside the 188-nation IMF. The United States and Canada refused to participate in boosting the IMF’s resources, seeking to keep pressure on Europe 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 by the deadline of the fall meetings of the IMF.
Elizabeth Stuart, a spokeswoman for Oxfam, said that now that the emerging market economies such as China have agreed to make increased contributions to the IMF’s resources, it was important for European nations to drop their objections to reducing their voting shares in favor of the new economic powers.
“Emerging economies have kept their part of the bargain by giving the IMF the money it asked for,” she said. “Europe needs to make room at the decision-making table in exchange.”
Of the more than $430 billion in increased support that the IMF raised, the agency released a list of specific commitments from 12 individual nations ranging from $60 billion from Japan to $2 billion from the Czech Republic.
Japanese Finance Minister Jun Azumi said his country wanted to make a significant contribution in part to say thanks for the support the world provided Japan last year.
“Last year we were hit by a great earthquake and a large number of countries provided assistance,” Azumi told reporters at a briefing following the G-20 meetings. “Now we are heading toward reconstruction and we are moving solidly so we have to help (other) people who are in need.”
The biggest total amount was $200 billion pledged back in December by Europe including $150 billion from nations that use the euro currency and $50 billion from other European countries.
The publicly announced amounts total $362.3 billion, leaving $68 billion in the pledges that Lagarde said she has received from China, Brazil, Russia and India. Officials offered no breakdown of those amounts and also did not disclose any possible timing of when these countries might make their pledges public.
French Finance Minister Francois Baroin told reporters Friday that the U.S. decision not to contribute was not a surprise given the difficulty the Obama administration would have winning congressional support for increased U.S. support to the IMF.
The support is coming in the form of loans the countries will make to the IMF which will be able to use those resources to make loans to countries facing financial difficulties. While most other nations do not have to get approval from their legislatures for these loans to be made by their central banks, the U.S. Federal Reserve cannot extend credit to the IMF without approval by Congress.
In addition to discussing fund raising, the G-20 officials heard a report Friday from Spanish Finance Minister Luis de Guindos. He told reporters the G-20 finance officials expressed their support for the reform measures Spain is taking to deal with its economic troubles.
Associated Press reporters Desmond Butler, Matthew Pennington and Luis Alonso contributed to this report.