Dr. Oby Ezekwesili is the Vice-President of the World Bank for Africa. She is originally from the West African state of Nigeria., a photo by Pan-African News Wire File Photos on Flickr.
April 19, 2012, 10:45 p.m. ET
IMF, World Bank, G-20 Spring Meetings
THE EVENT: The International Monetary Fund and World Bank are holding their spring meetings from Thursday through Sunday in Washington. Finance ministers and central bank officials from the Group of 20 nations are meeting Thursday and Friday.
THE SITUATION: The International Monetary Fund is in the process of expanding its lending capacity to roughly double its current amount of around $381 billion. Wednesday, IMF chief Christine Lagarde said she had commitments from several countries, including Poland and Switzerland, amounting to $34 billion, bringing the running total of pledges to around $320 billion. Lagarde on Thursday said she expected the fund's resources to be expanded "significantly" this week.
A draft IMF communique, however, left blank a paragraph on the resource issue as Lagarde negotiates with members for more commitments. Also, the fund has met resistance from emerging economies, with Brazil's finance minister saying his country wasn't ready to commit to a specific funding amount and China's vice finance minister saying his country hasn't yet made a decision on committing additional funds to the IMF.
Regarding the euro zone, Mahmood Pradhan, the IMF's deputy head for Europe, said that if one country were to exit the bloc and default on its debt, it would create the "biggest financial crisis" the world has ever seen because of the financial interdependence of the countries within the zone.
MARKET ACTION: The euro maintained gains after Lagarde's comments about expanding the IMF's resources.
Late Thursday, the euro was at $1.3138 from $1.3123 late Wednesday, according to EBS via CQG. The common currency was at Y107.20 from Y106.61.
European stock markets ended in the red and Spain's 10-year government bond yield rose as concerns about the country's debt problems rumbled on. Spain earlier in the day sold EUR2.54 billion bonds, just above the upper end of the target range, in an auction that was seen as a test of foreign investors" willingness to buy the country's debt. The Spanish Treasury, however, confirmed it paid a higher yield on the 10-year bond than previously.
IN THE BACKGROUND: In recent months, Lagarde has warned the amount of existing IMF resources "pales in comparison" to potential demand for fund cash. The IMF said it needs more of such resources as an essential backstop to Europe's firewall to meet potential demand for emergency loans.
Earlier in the week, the IMF marginally revised upward its global economic outlook, but warned that threats from the euro zone could plunge the world into another financial crisis and destroy growth prospects for countries both rich and poor alike.
The IMF chief said that while Spain is working to resolve problems with its ailing banks, she said the euro zone has resources available to help if needed. The European Central Bank hasn't restarted a program to buy Spanish bonds, despite calls by economists and policy makers for more central-bank help to help keep borrowing costs down.
There has been renewed anxiety in government-bond markets as worries have grown about whether Spain and Italy can finance themselves in the market, a marked damping of mood since the optimism in the wake of the ECB's injected cheap three-year funds to the region's banks.
WHAT THEY SAID: "The idea (to pump more money into the IMF) is good, we support it, but if the extra resources are fully allocated to Europe, it's a concern. It's not the best thing to do," Indonesian Finance Minister Agus Martowardojo said.
Outgoing World Bank President Robert Zoellick, who completes his five-year term in June, said the European Union is "walking a fine line," in its response to the crisis. He said recent actions from the ECB have only bought the bloc time to repair their economy. Some governments, he said, may risk squandering the opportunity.
Poland's Central Bank Governor Marek Belka said there are still fundamental problems in Europe and the region has to brace for a "protracted period of slower growth."
The onus now rests on Spain to reform its troubled economy, ECB Executive Board member Joerg Asmussen said. "The ball is clearly in Spain's court," he told an audience at a Bertelsmann Foundation event.
The Bank of Japan will "continue to pursue powerful monetary easing until the goal is in sight, mainly through a virtually zero interest-rate policy and the purchase of financial assets" to bring about its targeted inflation of 1%, central bank governor Masaaki Shirakawa said in a public speech.