January 19, 2012 / 7:50 AM / 8 years ago

UPDATE 1-China says meeting G20 pledge is key to IMF funding

BEIJING, Jan 19 (Reuters) - China’s Foreign Ministry said on Thursday that the world’s leading economic powers should honour a pledge to ensure the International Monetary Fund has sufficient resources to fight financial crises.

“In principle, we believe that the task is to implement the consensus reached at the Cannes G20 summit to strive together to ensure that the IMF has ample funds to cope with the current financial crisis,” foreign ministry spokesman Liu Weimin told a regular news conference.

The statement came in response to a question about whether China was receptive to proposals for a funding increase of up to $600 billion for the IMF.

The response stopped short of suggesting that China was ready to put up yet more cash that would likely be channeled to help Europe fight its debilitating debt crisis.

“At the same time, we hope that all sides will step up domestic approval procedures to ensure that the share reform proposal is implemented on time, fundamentally ensuring funding sources,” Liu added.

Leaders from the Group of 20 major economies reached a broad agreement at the Cannes summit in November 2011 to ramp up the IMF’s war chest to help stop the euro zone contagion plunging the world back into recession, but they were unable to agree on specific numbers.

Countries such as Britain, China and Australia said they were ready to inject new funds into the IMF, either through bigger quotas or through additional money for the IMF’s New Agreements to Borrow (NAB) crisis fund.

Group of 20 deputy officials meet in Mexico City on Thursday and Friday to discuss boosting IMF resources. Any outcome would need leaders’ signoff. G20 finance ministers meet in late February.

The United States and Canada said on Wednesday that Europe must put up more of its own money to resolve its sovereign debt crisis, raising doubts that G20 talks in Mexico this week can lay the ground for a deal on bolstering IMF resources.

Japan and South Korea also want Europe to do more and China might insist a number of conditions are met before it supports a boost in IMF resources.

IMF sources said the world faces a $1 trillion financing gap over the next two years if global economic conditions worsened considerably. The IMF’s current lending capacity is about $380 billion.

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