G20 Finance Ministers and Central Bank Governors reached an agreement to lift the funding resources of the International Monetary Fund by over $430 billion as the Eurozone debt crisis dent global growth.
"This is the result of a broad international cooperative effort that includes a significant number of countries," the International Monetary and Financial Committee and the Group of 20 Finance Ministers and Central Bank Governors said in a joint statement issued in Washington late Friday.
The statement said there are firm commitments to increase resources made available to the IMF by over $430 billion in addition to the quota increase under the 2010 reform.
Members affirmed that they remain committed to take necessary measures to secure global financial stability. Amid calls from emerging nations to have more say in fund management, IMF Chief Christine Lagarde succeeded in lifting the firepower.
G20 reaffirmed that the distribution of quotas should better reflect the relative weights of IMF members in the world economy, which have changed substantially in view of strong growth in dynamic emerging markets and developing countries.
The joint statement said resources will be available for the whole membership of the IMF, and not earmarked for any particular region.
Nonetheless, the new fund would be utilized to bailout troubled eurozone economies. The lending capacity of the IMF exceeds $1 trillion.
IMF Managing Director Christine Lagarde told reporters that resources will be drawn only if they are needed, and if drawn, will be refunded with interest.
The combined resources of the IMF and Eurozone would be sufficient to finance a bailout programme for either Italy or Spain should the need arise, Capital Economics said ahead of the final decision of G20. But, it will probably not be enough for both countries, the firm added.
"We also felt that the real solution to the crisis does not have to do with firewalls," IMFC Chairman Tharman Shanmugaratnam, who is the Singapore Finance Minister, told a news conference.
"The firewall is a necessary but far from sufficient condition to resolving this crisis."
European Central Bank President Mario Draghi said the new fund is not large enough if government's structural reforms and fiscal consolidation are not in place.
by RTT Staff Writer
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