The world’s biggest economies will agree to increase the International Monetary Fund’s resources to help tackle the European debt crisis, officials at the Group of 20 summit said yesterday.
Countries will be allowed to make voluntary contributions to boost the war chest of the IMF, the world’s lender of last resort, said sources close to the negotiations at the G20 meeting in Cannes, France.
“States that wish to, can, from around the autumn of 2012, raise their bilateral participation in IMF resources,” said the source, quoting a paragraph from the G20 declaration, to be issued today at the end of their summit.
The IMF currently has around $400 billion at its disposal but there have been growing fears that is too small to tackle a crisis that could force Greece from the eurozone and drag down Italy. British Finance Minister George Osborne had earlier confirmed that the G20 leaders had discussed increasing their funding for the 187-nation organisation, although he declined to confirm the deal or give any figures.
“The international community has also accepted that it needs to address the general global economic situation and there is a debate that has begun, but not concluded, about increasing resources to the IMF,” Mr Osborne told reporters.
“There are certainly no numbers yet and I suspect that those discussions will not conclude until tomorrow,” he said. Australian Prime Minister Julia Gillard said that talks would continue “through the night” on the extent of measures to boost the IMF.
The Washington-based IMF’s resources were boosted by a deal in 2010 which doubled the amount paid into the fund by its biggest-contributing member states, which include the United States and Britain. That agreement was meant to take effect a year from now but several national parliaments have yet to ratify it, so in the meantime member states have made temporary resources available to the IMF through lending agree-ments. But under the deal in the communique, the temporary arrangements will become permanent if the member countries chose to make them so, the source said.
The communique also sets out a new allocation of Special Drawing Rights (SDRs), which act as a sort of shadow currency that are tradeable between countries within the IMF.
It did not give a figure but the source said that the previous amount of $250 billion allocated in 2009 would be a reasonable comparison.
The IMF has been the main route for emerging non-European economies such as China and Russia to help prop up the euro, specifically by backing bailouts for debt-ridden countries such as Greece and Ireland in recent months.
Russian President Dmitry Medvedev said yesterday that officials from G20 nations had been thrashing out the best way to contribute.
“It is too early to name figures but there are figures and proportions each country assumes according to its membership in the IMF,” he said. British Prime Minister David Cameron said earlier yesterday that his country was prepared to boost its contribution to the IMF, currently at £29 billion pounds in total.