Finance ministers from the Brics group of emerging economies yesterday threw their support behind the idea of boosting the resources of the IMF and other multilateral financial institutions to help them deal with the spreading financial and economic crisis.
Brics finance ministers from Brazil, Russia, India, China and South Africa said yesterday that they were “open to considering, if necessary, providing support through the IMF or other international financial institutions to address the present challenges to global financial stability depending on individual countries circumstances.”
“Multilateral development banks are considered by developing countries as important partners in helping them meet their long-term development finance needs,” ministers said in a communiqué issued following a meeting of finance ministers from the five countries in Washington.
Calls have been growing for a substantial increase in the IMF’s lending capacity in light of the burgeoning sovereign debt crisis in Europe, which has stoked fears that the IMF’s lending capacity may prevent it from playing a meaningful role in any possible solution.
An increase in IMF resources “is one of many issues that need to be addressed,” IMF managing director Christine Lagarde told Emerging Markets, but she added that progress on it might not be “deliverable” at the annual meetings.
Reserve Bank of India governor Duvvuri Subbarao said at a press briefing that the “quantum” of resources required by the IMF to address a crisis centred on “rich” countries is likely to be significantly bigger than in past crises.
He added that while there was no formal discussion at yesterday’s Brics’ ministers meeting on the specific need for augmenting IMF resources, it is “possible” that they could offer such support.
Reflecting concerns shared by many emerging market policymakers and IMF shareholders, Subbarao said that emerging market policy makers would insist on “even-handed, transparent and predictable” treatment of all countries aided by the IMF.
However, echoing recent calls from a number of prominent policymakers, Brics ministers called on the Fund to accelerate governance reforms, criticizing its “lagging pace”.
“We must also move ahead with the comprehensive review of the quota formula by January 2013 and the completion of the next review of quotas by Janauary 2014,” they said in their communique.
“This is needed to increase the legitimacy and effectiveness of the Fund. We reiterate our support for measures to protect the voice and representation of the IMF’s poorest members.”
Mexican central bank governor Agustin Carstens has suggested that any capital increase must be accompanied by sweeping governance reforms.
“The fund urgently needs to be capitalized, but ... this would also be a very good opportunity for the rebalancing of voting power,” he told Emerging Markets.
“Emerging markets deserve to be more fairly and fully represented”, he said. “If this doesn’t take place in the coming years, the legitimacy of the fund is at stake.”