[Debate] (Fwd) BRICS to bail the IMF, so Lagarde can get more 'nasty' with Southern Europe

[Patrick Bond]

  Emerging powers ready to give IMF billions

Russia says that emerging countries are ready to commit enough new funds 
to fulfil International Monetary Fund chief Christine Lagarde's request

Business Day
LIDIA KELLY and LESLEY WROUGHTON
Published:2012/04/20 02:05:15 PM

MAJOR emerging powers stood ready on Friday to pledge money to bolster 
the International Monetary Fund's crisis-fighting war chest, though 
Brazil was holding out for promises that their voting power at the 
global lender would increase.

Russia said that the G20 advanced and emerging countries were ready at a 
meeting on Friday to commit enough new funds to fulfil IMF chief 
Christine Lagarde's request for at least $400bn to draw a line under the 
euro-zone crisis. Russia itself, he said, would offer $10bn.

"Trust me that the G20 will announce the final amount. This will be an 
amount that will satisfy the management of the International Monetary 
Fund," said Sergei Storchak, Russia's deputy finance minister.

Support from Russia, China and Brazil is crucial to achieve the doubling 
of the IMF's war chest the global lender is seeking. Europe and Japan 
already have pledged $320bn. An international diplomat said that in all, 
emerging nations have lined up at least $100bn.

The IMF has warned that the euro-zone's debt crisis presents the gravest 
risk to the global economic expansion, and financial markets worry that 
Spain and Italy may next require bail-outs, following Greece, Ireland 
and Portugal.

Enlarging the IMF's coffers could offer solace to nervous investors that 
any widening of the crisis could be contained. Ms Lagarde said on 
Thursday she expects to seal a deal on fresh funds at the World Bank/IMF 
meetings this weekend.

But Brazil said that as a condition for funds, emerging powers want 
fresh pledges to recognise their fast-growing global economic weight 
written into the G20 communique. They are frustrated over delays --- 
particularly by the United States --- in implementing an agreement to 
lessen Europe's sway at the IMF and lift China into the number-three 
voting slot.

"What we want and demand in every meeting is that this commitment be 
reaffirmed," Brazilian Finance Minister Guido Mantega said Thursday 
after a meeting of officials from the so-called BRICS nations - Brazil, 
Russia, India, China and South Africa.

Mr Mantega drove the point even more forcefully in a speech prepared for 
delivery on Saturday to the IMF's steering committee, saying it was no 
longer enough to simply repeat that voting reforms are crucial for the 
effectiveness of the IMF.

"Progress on this front has been limited and slow," he will say, 
according to the text.

Canada, meanwhile, is pushing against Europe's dominance on the IMF's 
24-member board. It wants to hold two votes when the IMF decides on how 
to use its new resources --- one by euro-zone countries and another by 
others. The idea would be to dilute Europe's power on euro-zone-related 
issues.

This drive reflects growing concern among non-European countries over 
the fairness in the global lender's dealings with Europe. The region has 
the largest single bloc on the IMF board and the fund is headed by a 
French woman.

"Given that the major challenge here is a sovereign debt challenge in 
euro-zone countries, and that euro-zone countries are asking non 
euro-zone countries to contribute to resources at the IMF, our view is 
that there ought to be two votes," said Canadian Finance Minister Jim 
Flaherty.

He has gained a sympathetic ear, South Korean Finance Minister Bahk 
Jae-wan, who said: "Their recommendation merits some consideration."

Still, funds were near to being sealed. The international diplomat said 
some countries may need to get final approval from their capitols, so 
any firm deal may have to await a meeting of G20 leaders set for June 
and that final sums remained unclear.

China could contribute $60bn, matching Japan's pledge, although Beijing 
had not finalised the number. Saudi Arabia would chip in a little less 
than China, while Russia and Brazil were likely to contribute between 
$10bn and $20bn each, the diplomat said.

This would easily reach the marker of at least $400bn set by Ms Lagarde. 
The firewall would complement the $1-trillion in emergency funds for 
Europe agreed upon by the EU leaders last month, which was another 
precondition for countries bolstering the IMF resources.

REUTERS

***


*ALEC HOGG:* Even if it is only a small amount, relatively speaking, 
that we are putting in, many African countries went through hell in the 
seventies and 80s because of conditionality according to these loans. 
Are you going to try and insist that there is similar conditionality now 
that the boot is on the other foot, as it were?

*PRAVIN GORDHAN:* Absolutely. The refrain coming and the, if you like, 
demands from many countries is that the IMF must demonstrate that it's 
even-handed. The IMF must demonstrate that in surveillance of all 
countries, developed and developing, it must be even-handed and that*the 
IMF must be as proactive in developed countries as it is in developing 
countries. The days of this unequal treatment and the nasty treatment, 
if you like...for developing countries and politeness for developed 
countries must pass.*



      29 September 2011 23:12


  SA might contribute to EU bailout (excerpt): Pravin Gordhan - Finance
  Minister


      Interviewer Profile

Alec Hogg is a writer and broadcaster. He founded Moneyweb and is its 
editor-in-chief.

# Email Alec Hogg 
<mailto:alec at moneyweb.co.za%20or%20follow%20him%20on%20Twitter:%20http://twitter.com/alechogg%20and%20http://twitter.com/moneyweb>

*ALEC HOGG**:* News that the International Monetary Fund is kicking in 
at least EUR250bn to the bailout of Europe sent shudders through South 
Africa today as it dawned that this country, our country, is going to be 
contributing as well. South Africa has 0.8% of the International 
Monetary Fund's voting rights, so if you take the EUR250bn euro bailout 
package, that means our share works out to about EUR2bn or R20bn. Now, 
put differently, we get in about R150bn a year from VAT. So if all of 
these numbers are correct, it would mean that two percentage points of 
what we pay on VAT would actually be used to bail out the Europeans. It 
doesn't sound right, does it? Well, it isn't, thank goodness. The 
contributions are not worked out in this way. It's a lot more generous, 
or a lot lower, as the country's Finance Minister Pravin Gordhan 
explained to us this afternoon.
***
/[Apologies for poor sound quality]/

*PRAVIN GORDHAN:*  ...not to contribute R20bn. The amount is a few 
hundred million, and it's about US$100m at most. But I don't want to 
commit to that now -- that depends on where we go. When we know...the 
kind of figure you are talking about...

*ALEC HOGG:* That's a huge relief. So we don't actually have to 
participate to the extent of South Africa's voting rights?

*PRAVIN GORDHAN:* Not in the sense you have calculated it. There's 
another way of calculating these things, and they have their own 
complexity. But we can give the absolute assurance to South African 
citizens that we are not contributing in those numbers, firstly, or to 
any process which neglects our responsibility to South Africa.
     And thirdly, we are part of a globalised economy and part of global 
institutions, and we are a very, very small shareholding in those 
institutions we continue to make a contribution towards building up 
capacity to assist developing countries as well that find themselves in 
difficulty.

*ALEC HOGG:* Even if it is only a small amount, relatively speaking, 
that we are putting in, many African countries went through hell in the 
seventies and 80s because of conditionality according to these loans. 
Are you going to try and insist that there is similar conditionality now 
that the boot is on the other foot, as it were?

*PRAVIN GORDHAN:* Absolutely. The refrain coming and the, if you like, 
demands from many countries is that the IMF must demonstrate that it's 
even-handed. The IMF must demonstrate that in surveillance of all 
countries, developed and developing, it must be even-handed and that the 
IMF must be as proactive in developed countries as it is in developing 
countries. The days of this unequal treatment and the nasty treatment, 
if you like...for developing countries and politeness for developed 
countries must pass.

     And in that sense we should all be very aware that the world around 
us is changing, and changing very fast. One academic ... in Washington 
that there are economic changes taking place, meaning that previous 
countries that used to be creditors or lenders of money are now debtors 
or borrowers of money. So there are fundamental shifts in the global 
economy and in the spending of countries that is taking place as well. 
The IMF has to play both an active role and indeed, some would say, a 
proactive role. There should be appropriate conditionalities on any 
country on an even-handed basis, and the same should apply to any 
European country well.

*ALEC HOGG:* At the time that the new managing director of the IMF was 
being considered, you were quite outspoken about the fact that it should 
come to someone from a developing country. Do you think that if 
Christine Lagarde had been, say, from China, that her approach as the 
managing director would have been different?

*PRAVIN GORDHAN:* She's been in office for a few months, and to date 
she's tried hard to be even-handed. She's been very courageous in 
telling the Europeans that their banks need to be capitalised. She's 
been also courageous in saying, "Watch it, we need to have a balance 
between fiscal consolidation and austerity measures on the one hand, and 
growth-promoting measures on the other hand, and if we neglect growth we 
will have an even more disastrous situation on our hands".
    Those are difficult issues in which so far she's played an admirable 
role and we hope she will continue to do so.

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