The International Monetary Fund has record levels of liquidity to bail out countries but if the financial crisis continues much longer it may need more resources, a senior IMF official said on Tuesday.
"It is worth thinking that if the problems continue to grow that we might think about whether we would need additional resources and we will be discussing with our members that possibility," IMF First Deputy Managing Director John Lipsky told CNBC cable news network. "For now we have record liquidity."
The global lender has said it can easily tap over $200 billion in resources and can quickly access more if needed. In a matter of days, the IMF has committed $2.1 billion to Iceland and $16.5 billion in loans to Ukraine and is drafting details of financing for Hungary as the financial storm turns on emerging economies.
Countries are usually allowed to lend up to three times their IMF quota, but in Iceland's case it was 11 times bigger and Ukraine's loan was eight times. In each case, IMF Managing Director Dominique Strauss-Kahn has said the extent of the crisis justifies exceptional access.
Each IMF member is assigned a quota based on its size in the world economy. The quota determines how much a country contributes to the IMF, its voting power and has a bearing on how much it can borrow. With little end in sight for the world's biggest financial crisis since the 1930s, British Prime Minister Gordon Brown on Tuesday said the IMF may need substantially more funding.
He said countries with substantial reserves such as China and the Gulf States could contribute more to the IMF. He will visit the Gulf at the weekend where the issue is expected to be raised. He said he was also speaking to Chinese Premier Wen Jibao in coming days.
Lipsky told Reuters in New York the IMF was trying to address the liquidity shortages facing many emerging economies in a package to be presented this week to the IMF board of member countries. "We've made some specific proposals, and we're, in fact, having discussions with our executive board ... to see whether we can come to agreement now about a specific outcome," he said in an interview.
The new liquidity fund could seek to offer a group of pre-approved emerging market economies US dollars in exchange for local currencies to ease short-term credit strains. For many countries, the markets malfunctioned so severely that they cannot quickly access the capital they need. It has been most acute in dollar-funding markets as banks hoard money and refuse to lend to each other.
A US official said the IMF has a fairly strong capital position and provided that proper controls were followed, it should have all the money it needs to launch the new facility soon. Emerging economies have been particularly hard hit by the crisis, forcing many to plunder their foreign exchange reserves to defend their currencies and financial systems. Mexico, for example, has sold $13.1 billion, or about 15 percent, of its international reserves since October 8 to prop up its peso.
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