The International Monetary Fund (IMF) says it is aiming to raise up to $600 billion in new resources so it can provide new loans to countries struggling with the effects of the growing euro zone debt crisis, and insulate the global economy from any further deterioration.
While the IMF estimates that it will need to increase its lending capacity by around $500 billion to lend to countries in need, sources present at an IMF board meeting on the issue on Tuesday told Reuters that a further $100 billion would be necessary to provide a “protection buffer.”
The Washington-based lender estimates countries around the world will need $1 trillion in loans over the coming years, according to the Associated Press.
Christine Lagarde, the IMF Managing Director, said yesterday that her staff are examining ways to expand the fund’s financial firepower, which currently has around $385 billion available, Bloomberg reported.
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The IMF has provided about a third of the financing of the euro zone’s rescue packages since the crisis started two years ago, but there is increasing concern that non-European countries will need additional assistance given the gloomy economic outlook.
Earlier today, the World Bank, the sister organization of the World Bank, warned emerging countries to prepare for a severe global downturn if the euro zone crisis worsens.
While euro-region nations have committed to contribute $150 billion euros, which the IMF has built into its $600 billion target, the US has said it does not intend to make any new bilateral loans, and some US congressional Republicans have threatened to pull $100 billion in US contributions if the funds are used to rescue more euro zone countries, Reuters reported.
Emerging market economies like China and Brazil have indicated that they would be willing to put up further cash to the IMF in exchange for greater voting powers.
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