Indonesia shuns campaign to bolster IMF’s fighting power

Indonesia will not join an international effort led by emerging countries to strengthen the financial capacity of the International Monetary Fund (IMF) in dealing with Europe’s debt crisis.

The leaders 12 emerging economies that include Brazil, Russia, India, China and South Africa (BRICS) have agreed to enhance their contributions to the IMF while demanding reforms in the Bretton Woods institution in the form of a bigger voting share.

On the sidelines of the G20 Summit on Monday, China announced for the first time that it would offer US$43 billion to the IMF reserves. Russia is said to have committed $10 billion, matching a pledge made by summit host, Mexico.

“It’s going to be the first time the fund is capitalized without the US, which reflects the importance of emerging markets,” Mexican President Felipe Calderon said last week as quoted by Bloomberg.

Other nation’s that have pledged their contributions, albeit smaller, are Colombia, Malaysia, New Zealand and the Philippines.

IMF said that it had received funding commitments of $456 billion, up from the roughly $430 billion it said it had secured in April. The temporary contributions will add to the $380 billion the IMF currently has available for lending.

“Indonesia is not making any commitment. That is the condition. Nevertheless, we are paying attention to other countries in Southeast Asia with their commitments,” said Mahendra Siregar, Indonesia’s Deputy Finance
Minister.

Mahendra denied that Indonesia’s financial capacity as the reason behind the refusal to join the international effort, saying that the country would rather focus on strengthening the capacity of developing countries instead of focusing specifically on Europe.

“We do not want to be considered as not paying attention to the needs of developing countries,” he said.

Speaking earlier on Sunday at a business forum, President Susilo Bambang Yudhoyono said that Indonesia was committed to maintaining budget deficit under 2.5 percent and “a manageable debt-to-GDP ratio” at 24 percent.

Also on Sunday, Finance Minister Agus Martowardojo said Indonesia fully supported international efforts to bolster the IMF fighting power. He said such a measure was crucial in the process to restore recovery in crisis-ridden countries. However, he said, Indonesia was still considering its contribution.

The BRIC nations and other emerging economies have long demanded more voting power in IMF as reflection of their growing influence in the global economy. Their new pledges is expected to strengthen a case to speed up a deal agreed in 2010 for voting quota reform that would allow China as the third-largest voting member.

BRICS nations represent 43 percent of the world’s population, about 18 percent of global economic output and $4 trillion in combined reserves.

Eurozone economies are struggling with a debt crisis that has led to Greece, Ireland, Portugal and Spain seeking financial support from IMF and the European Union. The issue dominated opening discussion at the G20 Summit that will conclude on Tuesday with a joint communique.

Excerpts from a leaked communique draft published by Reuters reveals that the G20 will commit to implement IMF voting reforms “in full” by October to better reflect the rise of emerging countries in the world economy.

The draft further said the vote reforms “are crucial to enhancing the IMF’s legitimacy, relevance and effectiveness.”