Emerging economies pose conditions on IMF boost

[1]

Leaders of emerging economies said on Monday that they wanted the IMF to put in place reforms to increase their influence before they step up contributions to a fund to prevent future crises.

Leaders of the so-called BRICS – Brazil, China, Russia, India and South Africa – said in a statement at a summit in Mexico that they were willing to step up their contributions to the IMF but only once existing funds dry up.

The International Monetary Fund, hoping to prevent a worsening of the global economic crisis, called last year for $500 billion in an emergency firewall to support nations at risk of contagion, but the money has fallen short.

The five BRICS leaders ‘agreed to increase resources available with the International Monetary Fund. In this context, they agreed to enhance their own contributions to the IMF’, said a statement released by India.

But the statement did not include numbers and the BRICS said that they expected their money to be used after current resources ‘are substantially utilised’.

"This would promote adequate burden sharing amongst IMF creditors. These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares," it said.

The BRICS leaders met in the Mexican resort of Los Cabos ahead of a summit of the Group of 20 major economies, which will spend two days looking for a way to slam the brakes on a spiraling debt crisis in the eurozone.

The emerging economies' call could be seen as a challenge to the United States, the world's largest economy, which has resisted contributing to the new fund.

US President Barack Obama is eager to stem the eurozone's woes, which are clouding over the US economy and his own re-election hopes, but faces intense political resistance at home to new financial commitments.

After Group of 20 finance ministers and central bankers met in Washington in April, the IMF announced a firewall size of $430 billion but has come up with only $340 billion in contributions.

The eurozone is by far the largest contributor, promising some $200 billion, raising concerns by some potential contributors that the firewall would eventually turn into a new European bailout fund.

Japan has contributed $60 billion, while Britain, South Korea and Saudi Arabia have each pledged $15 billion. Singapore and other European governments have also contributed smaller amounts.