- Offers $ 43 b in overall deal which will see Fund’s base doubling to $ 456 b
Reuters: China on Monday offered $43 billion to the IMF’s crisis-fighting reserves, rounding off a global push to nearly double the Fund’s war chest to $456 billion to help protect countries from fallout from the euro zone debt crisis.
China’s contribution was part of a pledge by Group of 20 countries made in April to supply the International Monetary Fund with extra firepower.
“These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members,” said IMF Managing Director Christine Lagarde.
“They will be drawn only if they are needed as a second line of defence” when other IMF loans have been depleted, she said in a statement during a Group of 20 summit in Mexico.
The leaders of BRICS nations – Brazil, Russia, India, China and South Africa – said earlier that they “agreed to enhance their own contributions to the IMF” but had insisted that the money be used only after existing funds were depleted.
According to a chart published by the IMF, Brazil, Russia and India each pledged $ 10 billion, while South Africa offered $ 2 billion. G20 host Mexico also contributed $ 10 billion.
“Countries large and small have rallied to our call for action, and more may join,” said Lagarde, who said total pledges had reached $ 456 billion – “almost doubling our lending capacity.”
The BRICS sought to tie the loans to long-delayed reforms that would give the developing world more say at the Washington-based Fund by boosting their voting power as shareholders.
“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,” the BRICS leaders said in a joint statement.
In their public remarks in Los Cabos, Chinese officials declined to discuss sums and stressed the need to implement IMF quota reforms agreed in 2010.
“If the quotas are not commensurate with the relative economic weight of the different countries, then it has to be changed,” said He Jianxiong, Director General of the International Department of the People’s Bank of China.
Growth of the emerging countries, which has far outstripped that of the rich world in recent years, made it “only natural that the quotas should be shifted from developed economies to developing economies,” he told reporters.
The five BRICS nations represent 43 per cent of the world’s population and about 18 per cent of global economic output. They have about $ 4 trillion in combined reserves, with the lion’s share held by export powerhouse China.
Emerging economies have long demanded more say at institutions like the IMF to reflect their growing clout. Their frustrations have grown with the likely delay in implementing the 2010 deal that would boost their voting power and make China the third-largest voting member of the IMF.
The Chinese Central Bank’s He indicated that Beijing still has to win over a sceptical public on the need for China, which still has hundreds of millions of poor people, to help bail out European countries with higher standards of living.
Describing money loaned to the IMF as an investment and a useful foreign reserve management tool, he said “it is actually a good investment in terms of safety, liquidity and yield”.
The big emerging economies are also seeking more influence in the world economy by planning wider use of currencies other than the dollar and euro. The BRICS statement on Monday said the five leaders had “discussed swap arrangements among national currencies as well as reserve pooling”.
BRICS finance ministers and central bank governors were instructed to study the swaps and pooling arrangements and relevant internal legal issues and report to next year’s BRICS leaders’ summit in South Africa, the statement said.
“The pool is mainly a preventative measure,” said He.
Brazilian Finance Minister Guido Mantega told reporters the plan to pool reserves “will increase confidence by making sure there is more ammunition available if there is a problem”.
The BRICS’ contributions to the proposed pool will be decided by size of each country’s foreign exchange reserves, Mantega said.