The International Monetary Fund should proceed with talks on increasing the size of its warchest at the same time as Europe discusses how to build a firewall to contain its debt crisis, a senior official from the fund said on Friday.
Emerging countries understand the need to boost the IMF's resources as Europe's debt crisis threatens the global economy, IMF Deputy Managing Director Naoyuki Shinohara said, signalling expectations that developing nations will contribute more money.
The IMF could face a difficult negotiating task, because some emerging economies could chafe at the idea of bailing out wealthier European countries without reassurances that the euro zone can draw a line under its two-year old debt crisis.
"Talks to boost the regional firewall and the global firewall in terms of the IMF's financial base need to proceed in parallel," IMF Deputy Managing Director Naoyuki Shinohara told Reuters in an interview.
"There is a broad agreement among countries about the overall framework. Based on this, discussions have begun about how much each country will contribute and the modality."
Officials from the Group of 20 rich and emerging countries meet later on Friday in Mexico City to set the agenda for financial diplomacy needed to keep the global economic recovery on track.
The IMF has estimated about $1 trillion will be needed to contain the euro zone debt crisis and half and Shinohara said half of that amount should come in the form of strengthening of the IMF's war chest and half should be provided by Europe.
However, The United States, China and other countries outside of the 17-country euro bloc want to see its members stump up more money before they commit additional resources to the IMF.
At the same time, countries also want to avoid a disorderly default for Greece, a violent break up of the euro zone and the ensuing havoc on the global economy.
"At present, we have started talks with countries to see how many countries are willing to contribute and if they would, in what way," Shinohara told a news conference.
"Countries, including emerging nations, understand the need to boost a global institution such as the IMF at a time when Europe's problems could affect countires outside the euro zone in a major way," Shinohara said when asked about emerging nations' roles.
Chinese Premier Wen Jiabao said on Thursday the world's No. 2 economy is considering increasing its participation in the European rescue funds aimed at resolving the debt crisis.
Wen didn't make an explicit financial commitment, but analysts say China is likely to play it safe and support Europe via the IMF.
Shinohara, a Japanese national, also said he understands Japan is also making various consideration on the matter as an important partner of the IMF and as its exports are being hit by the global slowdown in the face of the euro zone crisis. Shinohara took part in high-level discussions among 18 Asia-Pacific countries on the tax system in Tokyo, which ended Friday.
