Analysis: IMF funds drive caught in global power shift

Fri Apr 13, 2012 4:49pm EDT
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By Lesley Wroughton

WASHINGTON (Reuters) - Tensions among some of the world's leading economies are on a boil over a plan to raise new resources for the International Monetary Fund to contain the euro zone debt crisis and a quest by emerging economies to win more say in the global lender.

World finance leaders gathering in Washington next week will focus on proposals for countries to contribute more money to the IMF so it is better prepared in case of a fallout from any further escalation of Europe's debt crises.

Emerging market countries like China, Brazil and Russia are willing to put up more money for the IMF but they want something in return: greater voting power in the global lender.

It has become a hot-button issue given negotiations formally began this week on the next phase of IMF voting reforms to be completed in 2013. The emerging market push likely means Europe's voting share will be further diluted.

In January, the IMF said it would need $600 billion in new resources to help "innocent bystanders" who might be affected by economic and financial spillovers from Europe's travails.

Earlier this week, IMF Managing Director Christine Lagarde said the lender may not need as much money as it had thought because economic risks had waned. On Friday officials from the Group of 20 nations told Reuters the world's major economies are likely to agree to provide the IMF somewhere between $400 billion and $500 billion.

A G20 official, who requested anonymity, said the fundraising effort would likely raise about $50 billion from Japan and a similar amount from China and Saudi Arabia, in addition to the $200 billion already committed by Europe. Smaller amounts will likely come from countries such as Russia, Mexico and Brazil.

BUDGET POLITICS   Continued...

A photographer takes pictures through a glass carrying the International Monetary Fund (IMF) logo during a news conference in Bucharest March 25, 2009. REUTERS/Bogdan Cristel