Billions from UK taxpayer to boost the IMF

UK Political Editor

Friday 4 November 2011

BRITISH taxpayers look set to pledge several billion pounds extra as part of a "confidence-boosting measure" to bolster the International Monetary Fund and create a firewall to prevent a repeat of the Greek crisis.

BRAVE FACE: Prime Minister David Cameron is welcomed by French President Nicolas Sarkozy to the G20 summit in Cannes. Picture: Getty Images

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MICHAEL SETTLE UK POLITICAL EDITOR

Prime Minister David Cameron and US President Barack Obama are pressing their fellow world leaders about the need to boost the IMF facility to ensure it is big enough to stop any Greek-like crisis spreading in future.

On arrival at the G20 summit in Cannes, Mr Cameron said: “Let’s be clear, when the world is in crisis, it’s right that you consider boosting the IMF.” He continued: “What we wouldn’t support is the IMF investing directly in some euro bailout fund. That wouldn’t be right and we won’t back it.”The PM added: “There is no risk to the British taxpayer of seeing the IMF play its proper role. That’s what we’ve always supported.” At present, the IMF has a lending capacity of around $950 billion (£592bn). The UK’s share is 4.5%, which represents £29bn, £5bn of which is being used.In a briefing to reporters, Chancellor George Osborne signalled that a new enhanced figure for the IMF facility could come after more talks today, but he declined to speculate how much it would be and how much more Britain might pledge. However, it seems clear a major boost – some analysts have suggested an extra $1 trillion – would involve the UK’s share rising by several billion pounds.Only two years ago, the IMF facility was tripled. When asked about a bigger British share, Mr Osborne said: “We have always been part of the IMF, a leading voice in the IMF ... In as much as British taxpayers are exposed, I can say exactly the same about American taxpayers, Indian taxpayers, Chinese taxpayers, Thai taxpayers, South African taxpayers, Guatemalan tax-payers, Brazilian taxpayers. I could go on.”The Chancellor pointed out that no member of the IMF had ever lost any money as a result of a default. “At a time of international economic instability not just in the eurozone, it would be strange for Britain, almost alone around the table, to walk away from the IMF. I don’t think that would be a sensible thing for Britain to do,” he added. Britain and America are hopeful that growing economies such as China, India and Brazil will contribute more to an enhanced IMF facility. Indeed, Mr Osborne revealed China was “interested in providing support to the IMF”.Earlier, Government sources insisted that IMF funds would not be targeted specifically at the eurozone – it is already helping Greece, Portugal and Ireland – but at regions of the world where there were serious economic problems or the threat of such problems. One official pointed out how, for example, help was directed at South America in the 1980s.Yet, the reality is that the current global troublespot is in the eurozone and, if the enhanced fund is meant to stave off contagion, then money could end up supporting the likes of Italy and Spain.The total drawdown from the IMF facility to date is $250 billion of the $950 billion pot but some $400 billion is not regarded as available because the pot cannot be exhausted, meaning that $300 billion remains to be lent.One official said: “There is something to be said about taking a precautionary approach and getting ahead of the markets.”Another insisted that any expansion to the IMF fund would not be used as a substitute for action that needed to be taken by the eurozone countries. Last night, Ed Balls for Labour said he supported an increase in the IMF fund.However, the Shadow Chancellor stressed the IMF’s job was to support individual countries with solvency crises – not to solve a structural problem caused by eurozone countries being unable to agree the necessary steps to support and maintain their monetary union.

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Billions from UK taxpayer to boost the IMF

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