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EU wants IMF funds doubled

10 March 2009 10:49 (UTC +04:00)

Bakuâ€“ APA-Economics. The European Union will call on Tuesday for the International Monetary Fund’s resources for struggling nations to be doubled to 500 billion dollars (396 billion euros), a draft document showed, AFP reported.
"It is essential that the IMF has appropriate financial means to assist countries particularly affected by the current crisis," said the text EU finance ministers are due to approve ahead of a key G20 summit in London.
Late Monday, ministers from the 16 eurozone countries gave their backing to the document, with EU Economic and Monetary Affairs Commissioner Joaquin Almunia also backing a greater international regulatory role for the IMF.
"We agreed on the need to increase the resources of the IMF, to increase the lending capacity in these circumstances," Almunia told a press conference.
"We agreed also on the need to improve the way the IMF can contribute to the surveillance" of the financial sector.
The draft document seen by AFP on Monday stated that "EU member states support a doubling of IMF resources and are ready to contribute to a temporary increase if needed."
However, the statement, which is subject to last-minute changes, stressed that "while quotas should be the main source of IMF financing, their increase is not a viable solution in the short term."
Each IMF nation is assigned a quota based on its relative size in the world economy, and are used as the basis for how much member states must contribute and how big of a say they have at the international lender.
The EU document said that "additional resources should be mobilised in the first instance via enlarging and expanding" an existing facility known as the New Arrangements to Borrow, a credit line from members that can be tapped in exceptional circumstances.
While the document recommended "shared burden sharing," it suggested that the extra funds could come in particular from countries which have amassed huge foreign reserves -- an allusion to countries such as China and Japan.
While Japan already contributes to the New Arrangements to Borrow facility, China does not.
The IMF has repeatedly warned that its resources, and therefore its ability to lend to countries in difficulty, could shrink if the economic crisis endures.
It has already signed an agreement for Japan to borrow up to 100 billion dollars, although other reserve rich countries have not followed Tokyo’s example.
The European members of the G20 group -- Britain, France, Germany and Italy -- have voiced support for doubling IMF resources in preparation for a G20 summit of leading economic powers on April 2.