A row over giving more say in the running of the International Monetary Fund to countries such as China threatens to jeopardise the lender's bid to raise an additional $500bn to deal with the global economic crisis.
The IMF spent much of its annual summit in Washington, which ended last night, discussing how it will raise the new funds, but the developing countries on which it is depending for much of the money repeatedly warned that they would not contribute more without being given greater control of the organisation.
The $500bn (£340bn), which was agreed upon at last month's G20 meeting in London, is seen as a crucial weapon in the armoury of the international response to the credit crisis and economic downturn. A failure to secure the extra money could have serious implications for the growing number of countries that are dependent on IMF loans and aid.
However, representatives of some of the developing countries most likely to help reach the $500bn target are not yet convinced that the IMF's more powerful members are serious about ceding any control.
Alexei Kudrin, Russia's finance minister, warned yesterday that developed countries were proving reluctant to offer concessions. "We already meet a cool attitude and even resistance [to reform of the IMF]" Mr Kudrin said. "The leading countries are not in a hurry ... this was the main discussion, the nerve of the IMF meeting."
Dominique Strauss-Kahn, the IMF's managing director, has so far secured commitments of around $324bn from members for the top-up in the len- der's funding, including $100bn promised by the US.
Mr Strauss-Kahn said yesterday that a bond issue was one of the ways in which the IMF was hoping to make up the shortfall in funding, with countries including Brazil and China already having indicated that they would consider subscribing for such bonds.
"I'm sure this vehicle will be used," Mr Strauss-Kahn said. "Now we're discussing with different creditors the way to implement it and the amount that we put in."
However, Guido Mantega, the Brazilian finance minister, described the IMF's plans as "premature" and "insufficient". Mr Mantega, who yesterday met with finance ministers from Russia and China, as well as India, the fourth member of the so-called Bric group of leading developing nations, said that contributions made by these countries would be "provisional", implying that support might be withdrawn if the IMF's decision- making process is not reformed to their satisfaction.
The Brazilians are also anxious to see more of the IMF's lending directed towards emerging nations.
The IMF has already promised to change the shareholding and voting power of members by January 2011, but negotiations on the terms of such reform have only just begun. Firm proposals on many of the key issues around the management of the IMF are unlikely to be made before October.
Tensions at the IMF summit, which, like the G20 meeting, was disrupted by a wide variety of protesters, were heightened by a separate row over the forecasts made by the organisation about the next stage of the banking crisis. European governments are furious about the IMF's assertion that the continent's banks will be forced to write down the value of their assets by $750bn over the next year.
The British Government last week succeeded in having the IMF withdraw some of its forecasts about its borrowing and France yesterday joined the lender's critics. Finance minister, Christine Lagarde, said: "Many of us expressed our greatest reserve on the methodology adopted by the IMF."
Mr Strauss-Kahn is also attempting to defuse a potential argument between some European countries, which are increasingly focusing on how government intervention in the banking sector might be withdrawn once the crisis passes, and more cautious members, including the US, who insist it is too early to begin discussing an "exit strategy".
- More about:
- Christine Lagarde
- Dominique Strauss-Kahn
- International Monetary Fund
- Loans And Lending Market