As the International Monetary Fund (IMF) doubled its lending power with over $430 billion pledged to a reinforced safety net to bail out countries during global financial crises, India stressed that contributions should be voluntary and not linked with future voice or governance reform and should be able to bail out "innocent bystanders" affected by them.
These contributions also "need to retain their temporary character; they should not be looked upon as a substitute to quota resources," Indian Finance Minister Pranab Mukherjee said as the Group of 20 and the IMF-World Bank concluded their semi-annual meetings here Saturday.
"At the same time it is important that innocent bystanders affected by the crisis, particularly low income countries, are adequately protected and there should be sufficient resources available for them," he said calling upon IMF to anchor an "integrated and interconnected" response to global developments.
"The IMF has a critical role in anchoring global coordination in order to effectively harness the positive externalities of durable global economic and financial stability," Mukherjee told the policy-setting International Monetary and Financial Committee (IMFC) of the 188-member global lender.
"This will create the basis for more fundamental reform that creates a virtuous cycle of inclusive growth with low inflation, growing trade, and an international financial architecture that prevents future global financial instability and mitigates the adverse effects of crises," he said.
While welcoming the recent efforts by EU to raise the size of its firewall, Mukherjee stressed that EU efforts should continue to play the primary role for its members and the IMF assistance should only underpin the EU's efforts and play a catalytic role in order to provide confidence to investors.
Singapore Finance Minister Tharman Shanmugaratnam, who chairs the IMFC, told reporters that while strengthening of the global safety net was an "important step forward," the main emphasis must remain on fiscal and structural reforms to regain worldwide economic growth.
Christine Lagarde, Managing Director of the IMF, said the spirit and dynamic of the IMF-World Bank Spring meetings amounted to the "Washington moment" that she had been seeking to drive forward a collective solution to the crisis.
In a communiqué, the IMFC reaffirmed "the urgency of making the 2010 quota and governance reforms effective by the 2012 Annual Meetings to enhance the Fund's legitimacy and credibility."
The 24-member IMFC, including India, urged member countries to ratify the reforms designed to give a larger say to dynamic emerging markets and preserve the voice of poorer countries.
The Group of 24, which represents developing countries, said in a separate communiqué that they would focus on job creation and social safety nets that protect the poor and vulnerable. They said they were worried by a drop in official development assistance to poorer countries.
At the joint World Bank-IMF Development Committee, delegates said that growth in emerging and developing economies continued to be relatively strong but poor countries still need support.
(Arun Kumar can be contacted at email@example.com)