China Leads Nations Boosting IMF’s Firewall to $456 Billion

[beijingwalker]

China Leads Nations Boosting IMF’s Firewall to $456 Billion
By Sandrine Rastello - 2012-06-19T04:04:31Z

Emerging-market nations including China and Brazil formalized funding pledges to the International Monetary Fund, helping to almost double its lending power to protect the world economy from Europe’s debt turmoil.

With the addition of new pledges from 12 nations that also includes Russia, India and South Africa, the Washington-based lender said it now has received funding commitments of $456 billion, up from the roughly $430 billion it said it had secured in April. The temporary contributions will add to the $380 billion the IMF currently has available for lending.

“Countries large and small have rallied to our call for action,” IMF Managing Director Christine Lagarde said in a statement on the sidelines of a Group of 20 summit, adding that the new contributions would only be used as “second line of defense” after existing resources are depleted.

G-20 leaders are gathering in the Mexican beach resort of Los Cabos for a two-day summit dominated by the financial crisis in the 17-country euro region just as Spanish borrowing costs soar to a euro-era record. Canada and the U.S. abstained from pitching in for the IMF, despite calls by German Chancellor Angela Merkel for the rest of the world to do more.

“It’s going to be the first time the fund is capitalized without the U.S., which reflects the importance of emerging markets,” Mexican President Felipe Calderon said on June 16.

Pledge Amounts
The meeting’s host said Mexico would contribute $10 billion to the fund, matching pledge amounts made here by Russia, India and Brazil. China said it will provide $43 billion, while South Africa, Colombia, Malaysia, New Zealand and the Philippines were among nations offering smaller amounts.

The second replenishing of the IMF’s coffers in three years, while marking a victory for Lagarde, falls short of her initial fundraising goal of $600 billion.

“There is concern that the firewall available may not be adequate to deal with contagion,” Indian Prime Minister Manmohan Singh told leaders at the summit yesterday. “The resources currently expected to be mobilized by Europe and the IMF are less than was estimated a year ago, and the crisis is actually more serious.”