China rounds off push for bigger IMF war chest
* China to contribute $43 billion to IMF crisis arsenal
* BRICS to boost funds to IMF, but want reforms
* Brazil, Russia, India each offer $10 billion
* Emerging countries to study currency swaps
By Lesley Wroughton and Paul Eckert
LOS CABOS, Mexico, June 18 (Reuters) – China on Monday
offered $43 billion to the IMF’s crisis-fighting reserves,
rounding off a global push to nearly double the Fund’s war chest
to $456 billion to help protect countries from fallout from the
euro zone debt crisis.
China’s contribution was part of a pledge by Group of 20
countries made in April to supply the International Monetary
Fund with extra firepower.
“These resources are being made available for crisis
prevention and resolution and to meet the potential financing
needs of all IMF members,” said IMF Managing Director Christine
Lagarde.
“They will be drawn only if they are needed as a second line
of defense” when other IMF loans have been depleted, she said in
a statement during a Group of 20 summit in Mexico.
The leaders of BRICS nations — Brazil, Russia, India, China
and South Africa — said earlier that they “agreed to enhance
their own contributions to the IMF” but had insisted that the
money be used only after existing funds were depleted.
According to a chart published by the IMF, Brazil, Russia
and India each pledged $10 billion, while South Africa offered
$2 billion. G20 host Mexico also contributed $10 billion.
“Countries large and small have rallied to our call for
action, and more may join,” said Lagarde, who said total pledges
had reached $456 billion — “almost doubling our lending
capacity.”
The BRICS sought to tie the loans to long-delayed reforms
that would give the developing world more say at the
Washington-based Fund by boosting their voting power as
shareholders.
“These new contributions are being made in anticipation that
all the reforms agreed upon in 2010 will be fully implemented in
a timely manner, including a comprehensive reform of voting
power and reform of quota shares,” the BRICS leaders said in a
joint statement.
In their public remarks in Los Cabos, Chinese officials
declined to discuss sums and stressed the need to implement IMF
quota reforms agreed in 2010.
“If the quotas are not commensurate with the relative
economic weight of the different countries, then it has to be
changed,” said He Jianxiong, director general of the
international department of the People’s Bank of China.
Growth of the emerging countries, which has far outstripped
that of the rich world in recent years, made it “only natural
that the quotas should be shifted from developed economies to
developing economies,” he told reporters.
The five BRICS nations represent 43 percent of the world’s
population and about 18 percent of global economic output. They
have about $4 trillion in combined reserves, with the lion’s
share held by export powerhouse China.
Emerging economies have long demanded more say at
institutions like the IMF to reflect their growing clout. Their
frustrations have grown with the likely delay in implementing
the 2010 deal that would boost their voting power and make China
the third-largest voting member of the IMF.
The Chinese central bank’s He indicated that Beijing still
has to win over a skeptical public on the need for China, which
still has hundreds of millions of poor people, to help bail out
European countries with higher standards of living.
Describing money loaned to the IMF as an investment and a
useful foreign reserve management tool, he said “it is actually
a good investment in terms of safety, liquidity and yield.”
Indeed, the PBOC emphasized in an unusually detailed
statement on its website later that such pledges would not
necessarily be drawn down. The comments appeared aimed at
addressing domestic criticism that China should not be helping
out more prosperous countries.
For instance, China had promised to buy $50 billion in IMF
bills when the fund expanded in 2009, the central bank said, but
to date had only actually purchased $5.7 billion worth.
“The increase in capital is not free aid. It’s the IMF
borrowing from China on the basis of guaranteeing safe and
reasonable returns,” it said.
“China’s holdings of IMF bills are safe and with normal
interest payments so far. Participating in the increase of IMF
capital conforms to China’s interests and China’s international
status and international responsibility.”
The big emerging economies are also seeking more influence
in the world economy by planning wider use of currencies other
than the dollar and euro. The BRICS statement on Monday said the
five leaders had “discussed swap arrangements among national
currencies as well as reserve pooling.”
BRICS finance ministers and central bank governors were
instructed to study the swaps and pooling arrangements and
relevant internal legal issues and report to next year’s BRICS
leaders’ summit in South Africa, the statement said.
“The pool is mainly a preventative measure,” said He.
Brazilian Finance Minister Guido Mantega told reporters the
plan to pool reserves “will increase confidence by making sure
there is more ammunition available if there is a problem.”
The BRICS’ contributions to the proposed pool will be
decided by size of each country’s foreign exchange reserves,
Mantega said.
Article source: http://in.reuters.com/article/2012/06/19/g20-brics-statement-idINL1E8HICW020120619
Posted by braziltribune
on Jun 19 2012 Filed under Front Page.
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