HORSHAM, England (Reuters) - The G20 pledged on Saturday to shore up lending for emerging economies hit hard by the global financial crisis, but officials are still wrangling over how much money is needed, who will pay and how.
The thorniest issue is new money for the International Monetary Fund.
The IMF has said it needs an extra $250 billion to double its war chest to help countries needing emergency loans and it looks set to get that, given signals from its major shareholders Europe, the United States and Japan.
But collecting money from the IMF’s largest members sidesteps the tricky political issue of giving emerging market economies a greater say in IMF affairs. And U.S. Treasury Secretary Timothy Geithner has muddied the water further, saying an additional $500 billion was needed.
In addition, some Asian countries scarred by tough IMF terms on loans during the 1997-98 Asia crisis prefer to focus on the Asia Development Bank, whose capital the G20 finance ministers pledged to triple at this weekend’s meeting.
Still the IMF remains the largest lender.
“My forecast was that we needed to double our resources,” said IMF Managing Director Dominique Strauss-Kahn on Saturday.
“It may go even further. Tim Geithner suggested $500 billion. That might take time to reach, so doubling is the first priority. But if more is needed later, I‘m sure more will be provided.”
The target of $250 billion looks easily met.
Japan already has promised $100 billion. The United States and European Union each have signaled they could provide up to $100 billion. However, they are hoping that countries with large foreign exchange reserves, notably China will also pay into the pot.
The emerging countries say if they are to be expected to put money on the table, they should be given more power -- or quota -- on the board of the IMF.
In its statement the G20 finance ministers agreed to bring forward the next quota review and finish it by January 2011, rather than 2013. It did not, however, specify which method of raising money would be best, leaving more negotiations for the weeks ahead.
“We agreed on the urgent need to increase IMF resources very substantially. This could include further bilateral support, a significantly expanded and increased New Arrangements to Borrow (NAB), and an accelerated quota review,” the G20 statement said.
The NAB is an existing agreement under which 25 member countries stand ready to lend to the IMF.
This is the preferred method of boosting IMF funds for the Europeans and the United States. However, China is not a member so the agreement would need to be expanded, a process which officials estimate could take up to three months, if China was to be included.
Countries can also contribute bilaterally and this is the method that Japan has chosen with its $100 billion loan.
A European source said on Saturday that Asian emerging markets were reluctant to lend to the IMF following the region’s financial crisis in the 1990s.
They would prefer instead to increase funds to regional development banks, notably the Asian Development Bank.
Reporting by Anna Willard; editing by Jamie McGeever