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The International Monetary Fund’s Managing Director, Christine Lagarde, confirmed Saturday that the fund’s $384 billion in lending resources might not be sufficient to cover emergency lending requests if global economic conditions continue to deteriorate.She’s quoted in a Bloomberg report saying that the IMF’s funding capacity “looks comfortable today but pales in comparison with the potential financing needs of vulnerable countries and crisis bystanders.”
This is not the first time we’ve heard that the IMF’s lending capacity might not be sufficient to stem a global economic crisis. Chinese Central Bank Governor Zhou Xiaochuan had previously made similar remarks, though he and the leaders of other BRICS nations (Brazil, Russia, India, and South Africa) stated last week that they were “open” to contributing to global economic stability via the IMF.
The IMF has been instrumental in propping up Greece for the last 18 months, and announced last week that it would extend an emergency lending facility for another 6 months.
“The fund’s credibility, and hence effectiveness, rests on its perceived capacity to cope with worst-case scenarios,” Lagarde emphasised.
Analysts are speculating that salvation could come from the G20, which increased the fund’s size in 2009. More and more policymakers are passing off responsibility for addressing the crisis to the influential group and hoping for action from their October 14-15 meeting in Paris.
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