IMF's lack of resources seen as stumbling block

London: The global response to the financial crisis in eastern Europe has been hamstrung because the International Monetary Fund (IMF) is too small, former officials say.

Amid strains in emerging markets across the world and calls for the European Union to take the lead in rescuing countries such as Latvia, Hungary and Romania from collapsing banking systems and currency crises, the IMF has been scrambling to increase its firepower.

Simon Johnson, a former IMF chief economist at the Massachusetts Institute of Technology, said: "We are seeing the consequences of the lack of IMF resources. Programmes are probably undersized because the IMF is worried about running out of money."

The IMF last year provided $15.7 billion (Dh57.6 billion) of a $25.1 billion rescue programme for Hungary, but its resources are being rapidly depleted.

Ken Rogoff, another former chief economist, said: "The IMF doesn't have nearly the resources to backstop all of eastern Europe."

Rogoff echoed calls from Robert Zoellick, World Bank president, for the European Union to take a leading role in rescuing eastern Europe. But the European Commission has already spent nearly 10 billion euros of its 25 billion-euro rescue fund on Hungary and Latvia. The IMF, which has $142 billion in quickly available resources and $50 billion it can raise rapidly, recently finalised an agreement to borrow an extra $100 billion from Japan. It is seeking a further $150 billion from other members.

Emerging market countries insist they should have a bigger say in the running of the fund in return for providing more money. Officials involved in discussions say the draft of a paper by the G20's working group on the IMF recommends the fund bring forward the next review of "quotas" - the governments' contributions that determine their voting weights.

- Financial Times