European countries pitch for increasing resource, India remains non-committal, talks of alternate arrangements.
The European countries on Saturday pitched for augmenting resources of the International Monetary Fund (IMF) to fight the global economic crisis, but India remained non-committal.
The IMF might 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, the 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, and India said alternative arrangements should be looked at.
“Augmentation of resources of these institutions is a way to avert the crisis. But how to augment the resources, will be discussed collectively,” said Finance Minister Pranab Mukherjee at the G20 Finance Ministers meeting in Paris.
It is learnt that some countries, including India and Brazil, are of the view that the European countries themselves should solve the problem of sovereign debt crisis and work out a credible package to resolve the solvency of the euro zone-affected countries.
The countries may now resolve the issue at a bilateral level. If it is done, the bilateral loan quota position would not be affected. India’s view is that the IMF’s resources should not be augmented by preventing the rollback of New Arrangements to Borrow (NAB). Secondly, it is not only the IMF, the resources of World Bank, which is a crucial lender for emerging markets, that needs to be augmented and unless that is done the bank’s capacity to lend to the developing countries would be reduced.
“We should remember that one of the major reasons of tacking the problem of the first crisis was because of the proactive role the World Bank played by providing assistance to the developing countries. They had resources at that time, but now they have reduced substantially and are not in a position to fulfil even their mandated responsibility. 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,” Mukherjee said.
The finance minister added that first they should 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 the IMF or IMF may come out with an attractive package where countries can invest, he explained.
Australian and South African finance minister have written a letter for augmenting resources. G20 trebled support to the IMF to $750 billion, but not much to the World Bank, which gives funds to developing countries. India’s contribution to IMF was $14 billion in the last three years.
