India non-committal to Europe's firefighting ways

European countries today pitched for augmenting resources of the International Monetary Fund (IMF) to help it fight the global economic crisis, but India remained non-committal.

The IMF may need about $350 billion to fight the debt crisis in the Euro zone, said people familiar with the development at the G20 summit here. However, countries were divided on the issue of providing more resources to the IMF as well as the procedure for doing so. Emerging markets did not unanimously come out openly on the issue. India suggested to look at alternative arrangements.

“Augmentation of resources of these institutions is a way to avert the crisis. But how to augment the resources and all the related issues will be discussed collectively,” said finance minister Pranab Mukherjee.

It is learnt that some countries, including India and Brazil, are of the view that the European countries themselves should solve this problem of sovereign debt crisis and work out a credible package to resolve the solvency of these Euro zone affected countries. Countries may now resolve the issue at bilateral level. If it is bilateral loan quota position will not be affected.

India’s view is that IMF’s resources should not be augmented by preventing the rollback of New Arrangements to Borrow (NAB). Secondly, it said not only IMF, the resources of World Bank, which is a crucial lender for emerging markets, also need to be augmented and unless that is done the Bank’s capacity to lend to the developing countries would be reduced.

“We should remember one major reason of tacking the problem of the first crisis was because of the proactive role World Bank played by providing assistance to the developing countries. They had resources at that time but now they have reduced substantially and they are not in a position to fulfil even their mandated responsibility,” he said.

“So augmentation of resources both for the IMF and World Bank are needed but IMF augmentation should not take place at the cost of rollback of NAB,” he said.

He added they should first assess a credible package to resolve their solvency issue. These additional resources should go to meet liquidity requirements. If a country has huge surplus they can lend to IMF or IMF may come out with an attractive package where countries can invest, he explained.

Australian and South African finance ministers have written a letter for augmenting resources. G20 trebled support to IMF to $750 billion, but not much to the World Bank, which gives funds to developing nations. India’s contribution to IMF is $14 billion in past three years.