Los Cabos: India on Tuesday announced a 10 billion USD contribution to the IMF’s additional 430 billion USD financial firewall to help the debt-wracked 17-nation eurozone so that the faltering world economy is protected against the spread of any financial contagion.
The announcement of the contribution was made by Prime Minister Manmohan Singh in his address at the Plenary Session of the seventh summit of the Group of developed and developing countries(G-20) in this Mexican resort town against the backdrop of growing calls to nations to increase contributions to the International Monetary Fund(IMF) for the bailout fund.
India’s contribution along with pledges by other member countries of the five-nation BRICS bloc has helped increase IMF’s resources and give a boost to the 430 billion USD fund being used as a firewall to support struggling eurozone economies.
“The International Monetary Fund has a critical supportive role to play in stabilising the Eurozone. All members must help the Fund to play this role, I am happy to announce that India has decided to contribute 10 billion USD to the IMF’s additional firewall of 430 billion USD,” he told the world leaders at the seventh summit of the grouping which accounts for 80 per cent the world’s GDP.
India has previously pledged to make contributions to the bailout fund but did not disclose the exact amount of its contribution to the fund. According to Chinese Vice Finance Minister Zhu Guangyo, the BRICS is committed to pledge 60 billion USD to boost the firewall. Besides India and China, the other countries in the bloc are Brazil, Russia and South Africa.
The IMF fund will serve to help governments that are struggling to cope with debt repayments but eurozone leaders still faced pressure from their G-20 peers to make reforms to head off future financial crisis.
Calls were being made to the eurozone to put in place a bigger financial firewall to combat the crisis before other countries will pour more cash into the IMF Noting that developed countries have expanded the resources of the IMF enormously, largely to support programmes in rich countries, Singh said that steps are now needed to be taken to substantially expand the resource base of Multilateral Development banks so that they have the firepower to help developing countries pursue their development goals.
About countries pledging more resources to IMF, Singh said there is concern that the firewall available may not be adequate to deal with the financial contagion.
“The resources currently expected to be mobilised by Europe and the IMF are less than was estimated a year ago, and the crisis is actually more serious,” he said. The prime minister said that part of the solution lies in providing liquidity to cope with loss of market confidence. But, liquidity does not help when solvency is in question, he said. “To address this problem, liquidity must be provided in parallel with effective adjustment programmes that ensure an early return to debt sustainability,” he said. (PTI)