Japan and three Nordic countries said they would lend additional money to the International Monetary Fund, offering a lift to the fund’s managing director, Christine Lagarde, who is trying to raise as much as $400-billion (U.S.) over the objections of the United States and Canada.
The pledges include $60-billion (U.S.) from Japan and a combined $26-billion from Denmark, Norway and Sweden. The promises put Ms. Lagarde on stronger footing heading into a weekend meeting of the 187-member IMF this weekend in Washington.
Combined with $200-billion promised by the 17 members of the euro zone, this puts her well past the halfway mark to her goal.
“This strong support … clearly demonstrates these countries’ enduring commitment to multilateralism,” Ms. Lagarde said in a statement Tuesday. “Ensuring that the fund has sufficient resources to tackle crises and to promote global economic stability is in the interests of all our members.”
The pledge drive is an import test for Ms. Lagarde, a former French finance minister who is nearing the end of her first year on the job. She has travelled extensively to Asia, Latin America and the Middle East during her tenure, mostly recently as part of her campaign to drum up new funds.
But her efforts have been hindered by two former counterparts in the Group of Seven club of old economic powers: U.S. Treasury Secretary Timothy Geithner and Canadian Finance Minister Jim Flaherty, who have argued aggressively against a boost to IMF resources.
Lael Brainard, Mr. Geithner’s top adviser on international matters, told reporters Tuesday that Washington continues to believe the IMF has all the money it needs. “We do not intend to seek additional resources for the IMF,” she said.
As the European debt crisis flared anew at the start of this year, the IMF said it would need $1-trillion to guard against a worst-case scenario of a bankruptcy by a big euro-zone economy such as Italy or Spain. But last week Ms. Lagarde said the recent easing of financial stress in Europe meant she could do with a smaller increase. She told an Italian newspaper she wants to raise “more than $400-billion.”
Japanese Finance Minister Jun Azumi said he hoped that his country’s contribution to the IMF would encourage other countries to come forward. “I am confident that many other countries will pledge contributions to the IMF,” Mr. Azumi said told a news conference in Tokyo.
Japan’s position on IMF resources provides an important contrast to the resistance of the U.S. and Canada.
Mr. Flaherty, especially, has based his opposition on the contention that wealthy European countries have done too little on their own to warrant support from countries such as China and Brazil, which, despite their economic clout, are home to billions of poor people.
Japan is also critical of Europe’s efforts; Mr. Azumi said the euro zone’s $1-trillion financial backstop remains too small. But unlike Mr. Flaherty, he would rather reinforce the global economy’s defences, than keep scolding Europe for its shortcomings. “The world is in need of strengthening IMF lending, so Japan has been taking the lead in co-ordinating opinions with other countries concerned,” Mr. Azumi said.
Mr. Azumi said that he spoke to his Chinese counterpart and that their countries agree on the need for more IMF financing. However, China, Brazil and Russia have indicated they will contribute only if they are given a greater say in the way the IMF is run.
Great Britain has indicated it might be willing to pledge as much as $50-billion, provided Prime Minister David Cameron’s government is persuaded that Germany, France and the other members of the euro zone have taken sufficient action on their own.