IMF First Deputy Managing Director, John Lipsky, said the Fund needed to raise its lending capacity and boost confidence amongst members, in case more countries are forced to turn to the institution to borrow.
"Right now the IMF has adequate resources to respond to the demands that we see in front of us immediately," said Mr Lipsky said during a panel discussion at the World Economic Forum in Davos at the weekend.
"However, we think it is prudent at this time, to add contingent facilities that would double the resources available to us. We have, through quotas and existing borrowing agreements, $250 billion in total. We thought it prudent to add another $250 billion at this time," he said, adding that the IMF Executive Board is expected to consider a number of suggestions for boosting the IMF’s resources shortly.
Mr Lipsky also said that with adequate policy response by governments, including fiscal stimulus in advanced economies and some emerging markets, the world could see a revival of economic growth toward the end of 2009 "and a return over the next year to trend growth. But decisive action will be needed."
In its latest assessment published on January 28, the IMF states that world growth is forecast to fall to its lowest level since World War II, with financial markets remaining under stress and the global economy taking a sharp turn for the worse, sending both global output and trade plummeting.
The IMF has so far committed $47.9 billion in lending to a number of economies affected by the crisis, while negotiation have also started with other troubled states.
Speaking of the availability of additional resources, Mr Lipsky said Japan had already offered to lend the IMF $100 billion and that the body would to raise an additional $150 billion. "I want to make clear that this is contingent facilities to give confidence that we have the resources to respond if needed," he said, without giving further details where the additional resources would come from.
The IMF strategy has however also received some scorns from other economic sectors, feeling the Fund’s proposal was very modest.
Speaking during the same panel discussion at Davos, Montek Singh Ahluwalia, the Deputy Chairman of India’s Planning Commission and a former head of the IMF’s watchdog known as the
Independent Evaluation Office, said an extra $250 billion was a "very modest" proposal given the amount of resources being deployed in some advanced economies to counter the crisis.
He suggested two alternatives to tapping a few countries for the $250 billion in extra funding, which could include a tripling of the IMF’s quotas and a generalised issue of the IMF’s
Special Drawing Rights (SDRs), which supplement the existing official reserves of member countries.
Other critics have also pointed at the need for the IMF to also embrace reforms while the world is trying to adjust to current shocks.