Finance officials at odds over IMF funding plan
Finance officials are pledging to keep the momentum going in their efforts to combat a severe global downturn but have hit a stumbling block in differences over how to boost the resources of the International Monetary Fund.
The debate underscored what could be a growing divide within the 185-nation IMF, with emerging economic powers such as China, Russia, Brazil and India insisting that old-line powers such as the United States, France and Britain listen to their ideas on different funding approaches for the IMF.
At issue is how to supply a portion of the $1.1 trillion increase in resources for the IMF and other lending institutions that was set as a goal by President Barack Obama and other leaders at the Group of 20 nations summit in London on April 2.
The rich nations had hoped to get China and the other nations to commit to billions of dollars of support for that effort at these meetings. However, those countries are insisting that the IMF consider issuing bonds as a way to raise the support. The countries would buy the IMF bonds rather than extending the support in loans. The IMF has never issued bonds before, although the idea was explored in the 1980s.
While the difference would not seem that great — both the bonds and the loans would require the IMF to pay interest — the debate is also tied up in arguments emerging economies are making about the need to boost their voting power at the IMF, something that would come at the expense of the current power structure that favors the United States and Europe.
Those issues and others were scheduled to be debated behind closed doors on Saturday as Treasury Secretary Timothy Geithner and other finance officials meet for talks of the IMF's policy setting board.
The IMF meeting was also scheduled to discuss a proposal to increase the agency's oversight abilities to monitor global activity in hopes of preventing a repeat of the current banking crisis.
The talks began Friday afternoon with a meeting of the Group of Seven wealthy nations — the United States, Japan, Germany, France, Britain, Italy and Canada — and were followed Friday night with a dinner meeting of the Group of 20 countries, which include the seven wealthy nations plus the major emerging markets such as China, Russia and Brazil.
The G-7 issued a communiqué late in the day that essentially endorsed the positions their leaders had taken just three weeks ago at the London G-20 summit. However, the G-7 communiqué signaled that disputes evident in London, such as the battle over IMF funding and voting rights, have not yet been resolved.
Geithner and the other finance officials sought to play down the differences, insisting that the nations are pushing ahead with the ambitious agenda their leaders laid out in London to jump-start economic growth through trillions of dollars in increased government spending and tax cuts and efforts to stabilize their battered banks and get them to resume more normal lending.
The G-7 joint statement spoke hopefully of about the possibility that "economic activity should begin to recover later this year" with the countries pledging to push forward with stimulus spending and bank repairs to make that hope a reality.
However, Europe continued to insist that it has done enough on the stimulus front even though the Obama administration is worried that without greater efforts by European countries the global recovery will not begin as hoped by the end of this year.
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