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BRIC nations not to boost IMF resources without representation news
14 March 2009

Brazil, Russia, China and India have opposed plans to boost the resources of the International Monetary Fund and expand credit without putting in place a better regulatory mechanism and increased say for the emerging economic powers and other developing countries.

Guido MantegaBrazil, Russia, China and India (BRIC) will not contribute any extra money to the IMF until their voting power at the agency are raised, Brazil's finance minister Guido Mantega said in reply to World Bank group president Robert B Zoellick plea to increase member contributions to the IMF.

''The danger now is doing too little too late, incrementalism will prolong and increase risk. So far, the stimulus packages are short of the IMF target of 2 per cent of GDP, the assessments so far show about 1.4 per cent, and increasingly important, the possibility of withdrawal of stimulus in 2010, said Zoellick after talks with host UK's prime minister Gordon Brown and finance minister Alistair Darling.

''Stimulus packages alone are not enough. The IMF research of some 122 financial and economic crises shows that turnaround can't happen unless you clean up the bad assets and recapitalise the banks, and if you don't take on the banking issue, the stimulus is just like a sugar high.  It pushes some energy through the system, but then you get the letdown unless you reopen the credit markets,'' he said.

Without extra spending, he said, poor countries will suffer more, millions will fall into poverty, and growth will slow down.  About 200- to 400,000 more babies will die each year, he added.

''I believe it will be a positive sign if the G20 supports expanding IMF resources, condemns protectionism, and endorses a series of targeted practical solutions, including for developing countries,'' he said.

''I believe the IMF should review the stimulus packages and the banking workouts, so as to make this an ongoing process.  The WTO should monitor protectionist actions and make them public.  And it is most important to have a coordinated global response, and that's where the G20 meeting is important,'' Zoellick said.

Russia's finance minister Alexei Kudrin also said he expected the Financial Stability Forum (FSF) to be expanded before the G20 leaders meet in London on 2 April.

Mantega and Kudrin were speaking after representatives of the four major emerging economies met on the sidelines of a gathering of central bankers and finance ministers from the G20 nations a concerted move aimed at achieving part of the BRIC nations' goals in gaining a greater say in global financial decision-making.

"We will only agree to increase capital to the IMF after the reform of the (IMF) quotas is carried out, because there is still an imbalance in our participation in the IMF," Mantega said.

Kudrin said BRIC were ready for bolder reforms of the global financial architecture than other countries and had a common position on most "sensitive" issues.

The G20 meeting will take up the issue of doubling the IMF's resources to $500 billion to strengthen its ability to help developing nations facing funding crises during the global downturn.

Japan has offered $100 billion and the European Union is considering a loan to the IMF of $100 billion, leaving a shortfall of $50 billion.

China is sitting on a foreign exchnage reserve of $2 trillion and there have been calls on that country to help meet the shortfall.

BRIC countries do not expect IMF reforms to be high on the agenda with the G7 econonic powers themselves divided over the stimulus plan and the need for urgent financial sector regulations.

"I don't see a possibility of the representation of the G20 changing now," Mantega said. "In April, no; in October it is possible."

BRIC nations, however, do agree that the most pressing problem facing global leaders is how to rid banks of the toxic assets that are undermining bank balance sheets and crippling lending.

But, according to Mantega, it is for the United States to accelerate a resolution of banking system problems.

Kudrin said while BRIC countries on the whole support fiscal stimulus measures, they are against blind investments.

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BRIC nations not to boost IMF resources without representation