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Struggling nations depleting IMF’s bailout
LONDON | With Iceland, Pakistan, Hungary and Ukraine already clamoring for mountains of cash, the $250 billion set aside by the International Monetary Fund to help struggling nations through the economic crisis is beginning to look puny.
China and oil-rich Persian Gulf states should fund the bulk of a major boost in the IMF's bailout pot, Gordon Brown, the British prime minister who has burnished his reputation by taking the lead on the financial meltdown, said Tuesday.
Those countries have the largest currency reserves and therefore should do the most, Mr. Brown said, without specifying how much more money should be added to the fund for helping nations whose banking systems and currencies are being battered.
"We must act now. We must set up the fund as quickly as possible," Mr. Brown told reporters before heading to Paris for further talks on the crisis with French President Nicolas Sarkozy.
"I believe it is possible in a very short period of time to create an international fund that is strong enough to withstand these difficulties," Mr. Brown said. "It is in every nation's interest and in the interests of hard-working families in our country and every country that financial contagion does not spread."
Chinese institutions held relatively little of the toxic subprime mortgage debt hobbling Western institutions, thus were largely unscathed by the collapse of the U.S. housing market. But as a major exporter, the country is exposed to slumping demand for its products abroad if the debt crisis causes a deep global recession.
There was no immediate comment from the Chinese government, which reported foreign currency reserves totaling $1.9 trillion as of the end of September.
Speaking in Berlin, Bahrain's King Hamad bin Isa al-Khalifa didn't directly address Mr. Brown's call for the Persian Gulf to help but said the region was open to talks. "We would like to play a part in [working on] an international financial system, a new system," he said.
Mr. Brown's office said he would discuss how much money he believes should be pledged to the IMF fund during talks Nov. 15 with world leaders in Washington. He and others, including Mr. Sarkozy, have called for discussion of a new world financial architecture relying on global bodies like the IMF.
The IMF's executive board is expected to soon consider streamlining its emergency-loan programs ahead of a stream of petitions that analysts fear will be coming from emerging economies needing support.
It already agreed to lend Iceland $2.1 billion and Ukraine $16.5 billion, and is in talks with Hungary for an estimated $10 billion to $12.5 billion in loans. Pakistan said Tuesday it would ask for an IMF bailout within two weeks if it cannot secure $5 billion in funding from other sources.
Mr. Brown said he planned to hold telephone talks with Chinese Premier Wen Jiabao this week and would go to the Persian Gulf region Saturday to discuss the crisis.
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