Finance ministers aim to bolster recovery, boost IMF role (1st Lead)

Oct 4, 2009, 12:12 GMT

Istanbul - Finance ministers promised to keep up public spending measures until a stronger economic recovery takes hold and were poised on Sunday to endorse new monitoring powers for the International Monetary Fund (IMF).

But as the IMF's steering committee met in Istanbul, a battle was brewing over how much extra say developing countries should get in global financial institutions.

Brazilian Finance Minister Guido Mantega said the IMF was 'ill-prepared' to deal with the past year's economic crisis and said 'much remains to be done' to make the IMF more representative.

Finance ministers said ahead of the meeting that they were committed to doing what it takes to keep a tentative recovery of the global economy alive.

Joaquin Almunia, the EU's economic and monetary affairs commissioner, said the economic crisis of the past year had lowered the growth potential of the world's wealthy nations.

'The worst of the crisis is probably behind us, but there is no room for complacency,' he said. 'The crisis has left some lasting damage and in the coming years growth is likely to remain relatively subdued.'

The Group of Seven (G7) industrial nations also pledged on Saturday to maintain hundreds of billions of dollars in public spending until there were clearer signs of an economic recovery. The recovery was 'fragile' and labour market conditions had yet to improve.

The IMF's decision-making committee was set to endorse a call at last month's summit of the Group of 20 (G20) - a bloc of advanced and developing economies - for the IMF to help the world shift its growth dynamics to a more balanced footing.

The idea is for the IMF to ensure that government policies are better in sync with each other in future, in order to prevent a build-up of imbalances that fuelled the current crisis.

In April the G20 also agreed to a massive boost in the IMF's resources for helping countries in crisis, tripling its lending reserves to 750 billion dollars.

'As IMF governors, we have an important responsibility to work collaboratively to advance the reform agenda to support a durable recovery and head off future crises,' said US Treasury Secretary Timothy Geithner.

But while the IMF is set to get major new powers, developing countries declared themselves unsatisfied with a deal to give them more influence over the institution. The issue was a key source of tension during Sunday's meeting.

'I believe that we all recognize that much remains to be done to make the institution more effective, more legitimate and more representative,' Brazil's Mantega said.

The G20 pledged to shift voting shares by at least 5 per cent in the IMF, which would give developing countries about 48 per cent of the votes in the crisis lender. Poorer nations on Saturday said they would continue to press for an equal voice with industrial nations.