The International Monetary Fund has said that it is aiming to increase its financial firepower by around $500 billion so that it can give out new loans to help mitigate a worsening financial crisis.
Responding to widespread speculation surrounding its funding requirements, the Washington-based institution said its staff estimates that countries around the world will need about $1 trillion in loans over the coming years.
Most of the concerns centre on the 17-nation Euroone, which has been embroiled in a debt crisis for around two years.
“At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations with the fund’s membership have been completed,” a fund spokesman said in a statement.
Thanks to some $200 billion that European countries have recently promised to the IMF, it is already more than one third on its way to reaching its fund-raising goal.
The IMF has put up about a third of the financing of the Euro Zone’s bailouts over the past two years, but there are growing worries that non-European countries will also need more help given the worsening economic outlook.
Earlier, its sister organisation, the World Bank, urged the emerging countries that they have to be ready for a severe global downturn if the crisis in the 17-nation Euro Zone intensifies.
The Euro Zone, in particular, has been pushing countries around the globe to give more funds to the IMF on the hope that it would build up a larger firewall to stop the continent’s debt troubles from spreading to large economies like Spain, Italy or even France.
But so far, even countries relatively flush with cash as China or Brazil have been reluctant to put up more money for Europe. The United States is also reluctant to increase the fund’s resources.
British Prime Minister, David Cameron, said on Wednesday that the government would be prepared to back an increase but that he would require approval from his Parliament.
“We believe the IMF must always lend to countries, not to currencies,” he said at a news conference with Italian Premier, Mario Monti. “We would only act if that was with others, not just as part of a Euro Zone measure.
However, Cameron said it’s up to the Euro Zone itself to prove that it’s “standing behind its own currency.”
How the IMF’s fund-raising goal will be reached is set to be discussed at a meeting of finance ministers of the Group of 20 leading economies in Mexico next month.