Exclusive: G20 may boost IMF resources by $400-500 billion: officials

BRUSSELS Fri Apr 13, 2012 7:44am EDT

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), gestures during a news conference at the meeting of finance ministers and central bankers from the Group of 20 top economies in Mexico City February 26, 2012. REUTERS/Edgard Garrido

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), gestures during a news conference at the meeting of finance ministers and central bankers from the Group of 20 top economies in Mexico City February 26, 2012.

Credit: Reuters/Edgard Garrido

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BRUSSELS (Reuters) - The world's 20 biggest economies are likely to agree to increase the resources of the International Monetary Fund by between $400 and $500 billion, rather than the $600 billion initially sought by the IMF, Group of 20 officials have told Reuters.

The extra money is to give the IMF, which is a lender of last resort to governments, more firepower to fight the sovereign debt crisis, triggered by unsustainable policies in euro zone countries such as Greece, Portugal and Ireland.

G20 finance ministers meet next week in Washington to discuss the IMF's call for more resources from January after the euro zone increased the size of its own crisis-fighting funds in March in response to G20 pressure.

IMF Managing Director Christine Lagarde said on Thursday that reaching an agreement could take some time, a sign that next week's meeting may not be the last word.

But she also said the IMF may not need as much money as it thought just a few months ago as economic and financial risks had receded and the global lender's funding needs were now smaller.

Officials said that with the first quarter peak of euro zone government refinancing needs already taken care of by the European Central Bank's cheap long-term loans, or refinancing operations, the need for more IMF resources has diminished.

"I would say it will be somewhere between $400 and $500 billion and it very much depends on how much the big global economies and European, but non-euro zone economies pledge," one G20 official said.

In January, the IMF estimated it would need an additional $500 billion to lend and another $100 billion for reserves to erect an adequate safeguard against the risks posed by the euro zone's crisis.

"It has always been clear that the $500 to $600 billion ... was too much, not realistic," a second G20 official said.

"We would be happy if we get as much from other countries as the Europeans are willing to provide," the second official said.

Euro zone countries have committed to provide 150 billion euros ($200 billion), while other European Union countries have pledged another $50 billion.

The first official said China and Japan might provide another $100 billion or slightly more between the two of them.

"Japan and China appear to be relatively happy with what Europe has achieved," a third G20 official said.

"But for developing economies, there's still a strong sense that rich members like Germany should play a bigger role in fixing the region's problems. There might not be a deal until the last minute," the third official said.

Officials said there would be intense telephone diplomacy under IMF coordination between capitals next week to discuss who will pledge how much and when.

The only countries not expected to contribute to the increase in IMF resources now were United States and Canada.

"All the others are candidates to pledge to an increase in the NAB (New Arrangements to Borrow) resources," the first official said.

The discussion of more cash for IMF bailouts of governments comes at a time when fresh concerns about the sustainability of Spanish public finances have boosted Madrid's borrowing costs on the market close to six percent.

"In the framework of discussions about the euro zone crisis, Spain represents a downside risk," the first official said.

"There will be a mention of it, without going into details. I don't expect there will be specific sniping at Spain, the focus will be clearly on policy responses and IMF resources."

(Additional reporting by Gernot Heller in Berlin, Leika Kihara in Tokyo and Dave Graham in Mexico City; Reporting By Jan Strupczewski. Editing by Jeremy Gaunt.)

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