The UK has promised an extra $11bn of standby finance for the IMF, which will be used to support countries that are struggling in the face of the economic crisis.
This sum, on top of the initial $15bn pledged in spring could be drawn on within months since the IMF’s original war chest is understood to be close to running dry after it has had to come to the rescue of various countries, including Iceland and Pakistan.
Britain’s contribution forms part of the cash from the European Union, which yesterday raised the amount it is pledging from about $100bn to $175bn. Nonetheless, the G20 is still understood to be some way short of the $500bn target, despite the pledge.
It comes just days before the world’s finance ministers will meet in London to discuss progress on the G20’s agreement forged in the April summit, and the IMF shortfall is expected to be at the top of the agenda.
An international clampdown on pay and bonuses within the financial sector will also be debated at the meeting on Friday and Saturday. Discussions there will pave the way for the G20 leaders’ summit in Pittsburgh at the end of this month, where they will be keen to signal an agreement on a way forward for this highly contentious issue.
“The bankers are partying like it’s 1999, and it’s 2009,” said Anders Borg, the Swedish finance minister yesterday. “The bonus culture must come to an end and it must come to an end in Pittsburgh.” Angela Merkel, the German Chancellor, said separately that “clear pay rules” must be drawn up at Pittsburgh.
So far the French President, Nicolas Sarkozy, has taken the toughest stance among leaders and called for a “cap and tax” approach to bonuses. Leaders will want to emerge from Pittsburgh with an agreement that applies to the next bonus season. However, there are fears that the US will not support tough restrictions on bonuses, and that stricter European laws could undermine the banking industry there.
In a letter to delegates ahead of the meeting in London, the Chancellor Alistair Darling said that other items on the agenda would include any further responses needed to secure a global recovery and ensure “high sustainable growth”.
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