G-20 nations double Fund’s war chest amid fears of a looming eurozone economic crisis
European governments were warned against relaxing their efforts to end two years of debt turmoil as the International Monetary Fund won more than $430 billion to safeguard the world economy.
IMF Managing Director Christine Lagarde's push for a doubling in lending power paid off despite complaints from emerging markets wanting more say in how the fund is run and calls from some richer nations for aid to be more tightly controlled.
That left finance chiefs from the Group of 20 and beyond stressing that Europe must now justify the show of solidarity by doing even more to restore fiscal health and spur economic growth. Failure to do so could imperil a global recovery the G- 20 labeled "modest" and subject to "downside risks."
"The firewall is a necessary, but far from sufficient condition to resolving this crisis," said Tharman Shanmugaratnam, the finance minister of Singapore who chairs the IMF's policy-steering committee. "The real solution has to do with the fiscal and structural reforms that address the real causes of this crisis."
Negotiations over the second replenishing of the IMF's coffers in three years dominated yesterday's Washington meeting of G-20 finance chiefs. It didn't come without a fight and fell short of Lagarde's initial goal of $600 billion in new resources to bolster a lending capacity currently at $380 billion.
While countries from the UK to Australia pledged money, emerging markets from China to Brazil held back details of their commitments as they tied them to securing more heft within the IMF. A 2010 plan to reduce the power of rich nations has yet to be ratified, leading Brazilian Finance Minister Guido Mantega to complain that progress "has been limited and slow."
The G-20 conceded in a statement that votes at the fund "should better reflect weights of IMF members in the world economy, which have changed substantially in view of strong growth in dynamic emerging markets."
Such economies also are concerned that the latest boost of cash will lessen pressure on European authorities to take the "painful and politically difficult reforms" still needed, said Eswar Prasad, professor of trade policy at Cornell University and a former IMF official.
Some rich countries including the U.S. have also balked at contributing more, arguing the IMF already has enough cash and that the relatively-rich Europe should do more to save itself. With 80 per cent of the IMF's credits set to be tied up in Europe by 2014 and its executive board heavy with voices from that continent, Canadian Finance Minister Jim Flaherty proposed non-Europeans wield a veto over future aid to the region. He also attacked the IMF for acting alongside European authorities in orchestrating loans to the likes of Greece.
"Every borrowing country should be treated the same," Flaherty said. "This means that conditionality for any program should be set solely by the IMF."
Lagarde stressed the new money won't be earmarked for Europe, noting "the fund is here for all the membership" and future loans will come with tough conditions.
The Gujarat government on Wednesday said that over 18 per cent of the projects, for which memorandums of understanding (MoUs) were signed during the ...
Raghuram Rajan said that the Reserve Bank will seek to bring inflation rate to the mid-point of the band of 4%