Brown seeks cash for IMF as China, India feel crisis
British Prime Minister Gordon Brown on Sunday called for billions of dollars in extra funding for the International Monetary Fund to prop up struggling economies, while Chinese Premier Wen Jiabao said maintaining China's strong domestic growth was his priority.
Leaders from Mumbai to Moscow and Berlin moved to support
their own economies on Saturday, with India's central bank cutting interest rates for the second time in two weeks, Russia putting 170 billion roubles ($6.4 billion) into a state bank and German Chancellor Angela Merkel pledging support for a big investment package to boost Europe's largest economy.
Brown, speaking in Riyadh, said oil-producing Gulf States
and China should contribute money for the IMF to lend to countries at risk of financial collapse.
If we are to stop the spread of the financial crisis, we
need a better global insurance policy to help distressed economies, Brown said.
Chinese Premier Wen, writing in the ruling Communist Party's
ideological journal, warned of growing domestic social risks from a global economic downturn.
Against the current international financial and economic
turmoil, we must must give even greater priority to maintaining our country's steady and relatively fast economic development, Wen wrote.
We must be crystal-clear that without a certain pace of
economic growth, there will be difficulties with employment, fiscal revenues and social development...and factors damaging social stability will grow. China cut interest rates on Wednesday for the third time in
six weeks to help the world's fourth-largest economy ride out the reverberations of the global financial crisis.
In India -- like China, a magnet for foreign investment in
recent years as their economies roared -- the central bank on Saturday cut its main lending rate for the second time in as many weeks to ease a cash squeeze and spur economic growth.
INDIA WAS GETTING WORSE
Analysts said the surprise move showed Indian concern that
strains on its economy were quickly becoming more severe.
These actions were necessary (and had) to be taken on the
liquidity front...the situation was getting worse, said Vikas Agarwal, a strategist at JP Morgan.
The central bank cut the repo rate, its main short-term
lending rate, by 0.5 percentage point to 7.5 percent and banks' cash reserve requirements by 1 percentage point to 5.5 percent.
Policymakers around the world have slashed interest rates in
recent weeks and injected huge amounts into their banking systems to try to combat the spillover effects of the global crisis, which has caused credit markets to freeze up and threatens to plunge the world economy into recession.
In Riyadh, Brown said the IMF needed hundreds of billions of
dollars to protect struggling economies from the crisis.
That is why I have called for more resources for the IMF --
hundreds of billions of dollars on top of the $250 billion they already have available -- to lend to those countries at risk of financial collapse, said Brown, who has positioned himself at the forefront of the global response to the crisis.
In response, Kuwait's finance minister said his government
would base any decision to support international markets on potential returns and investment opportunites.
British business minister Peter Mandelson said that
persuading Saudi Arabia to contribute money would take time, indicating that no promise of cash is expected this weekend.
That's why the prime minister spending hours talking one on
one with the king of Saudi Arabia is so important, Mandelson told reporters.
Brown's tour of the Gulf precedes a global summit in
Washington on Nov. 15 at which he and some other world leaders will press for reform in the international financial system.
The British leader said that cooperation on getting the
world economy through the crisis could create a new global order - fairer, more stable and offering greater prosperity for all. RUSSIA, GERMANY UP EFFORTS
In South Korea, where there have been concerns about banks'
exposure to the global liquidity squeeze, the central bank said the financial system remained sound.
There does not seem to be a likelihood of the unrest in
domestic financial markets that originated in the international financial markets developing into a crisis for the Korean financial system as a whole, a Bank of Korea report said.
Banks everywhere have been racing to shore up their balance
sheets after a spate of collapses and hastily arranged mergers prompted by heavy losses from bad mortgages and financial derivatives related to them.
On Saturday, Russia's Finance Ministry said it placed 170
billion roubles ($6.41 billion) from its National Wealth Fund with state bank VEB as part of a plan to allow for state purchases of shares and corporate bonds.
The news of state share purchases helped Russian shares rise
sharply, lifting them to a 50 percent gain for the week. Shares were trading on Saturday because Monday and Tuesday are public holidays.
Also on Saturday, Germany's Merkel promised support for an
extensive package to help ordinary Germans, which a government paper said would give the economy a 50 billion euro boost.
Germany put together a 500 billion euro ($638.9 billion) rescue package for banks last month. Merkel and Brown will meet in London on Thursday.
The global crisis has overshadowed the election to pick a
successor for U.S. President George W. Bush, who leaves office in January. Republican John McCain and Democrat Barack Obama swept through through battleground states on Saturday in a last-minute push before Tuesday's vote.
The developments in the worst financial crisis in eight
decades followed signs in the past week that world markets were stabilising, with interbank rates falling and U.S. stocks posting their biggest weekly gain in 34 years.