Hot seat: In this April 10, 2012, file photo, a broker sits in the stock exchange in Madrid. Worries about Spain's finances intensified on April 10, when the country's bond yields on international markets rose despite expectations of a new round of austerity measures. The Spanish government is under intense pressure to show it can rekindle economic growth and cut its budget deficit to avoid becoming the next eurozone country to need a bailout, while the joblessness rate is 23 percent and the economy is shrinking. (AP/Paul White)
The G-20 financial leaders have pledged to provide US$430 billion in new resources to the International Monetary Fund (IMF) partly to weather the impacts of the eurozone debt crisis.
IMF managing director Christine Lagarde said that the new funding, which has almost doubled the IMF’s lending capacity, signaled the strong commitment of the international community to protect the world’s financial stability and put world economic recovery on “a sounder footing”.
“These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members,” she said on Friday afternoon (Saturday morning Jakarta time) after the G-20 finance ministers and central bank governors meeting in Washington, DC.
“They will be drawn upon only if they are needed, and if drawn upon, will be refunded with interest,” she added.
Worries about the eurozone crisis have clouded the talks of the world’s finance officials during the IMF and the World Bank Spring Meeting in Washington this week.
In its flagship publication World Economic Outlook, released on Tuesday ahead of the meeting, the IMF estimated that the world economy would expand by only 3.5 percent this year, down by 0.4 percent from last year.
It also cut its growth projection for Indonesia to 6.1 percent, down by 0.4 percent from last year and lower than the government’s target of 6.7 percent this year.
Eurozone countries, namely Greece, Italy, Spain, Portugal and Ireland, are struggling with a mammoth amount of debts that may require bailouts of more than 1 trillion euro.
With the IMF coming the rescue, it is likely that it will issue the same recommendations it provided for other debt-strapped countries in Latin America, Asia and the European periphery, which critics say have proven to be unsuccessful because of each country's different economic characteristics.
China for example, which did not follow IMF recommendations, has instead developed into a world economic giant. (mtq)