16 Nations to Default

Globe and Mail Update
February 26, 2009 at 11:53 AM EST
The International Monetary Fund says the financial crisis could push as many as 16 nations into default, and that it will need to double its lending capacity to mount an appropriate response.

In a 31-page report released today in Washington, the fund argues that it will need the equivalent of about $500-billion (U.S.) to prop up governments that have been crushed by the collapse of the global economy.

The report specifically noted that there's a high likelihood that more nations in Eastern Europe will come to the IMF for help.

“The institution's global membership, as well as its capacity to catalyze broader sources of financing, further reinforce the importance of it maintaining a central role in the provision of balance of payments support,” the report said. “To play this role credibly, however, the fund must have resources commensurate to the magnitude of the problems at issue.”

IMF leader Dominique Strauss-Kahn

The report serves as intellectual backing for the fund's managing director, Dominique Strauss-Kahn, who began pushing the world's richer countries for additional financial support earlier this month.

Japan was the first to respond, pledging an additional $100-billion to the IMF at a meeting of Group of Seven finance ministers and central bank governors in Rome on Feb. 14.

The G7 as a group said they supported giving the IMF greater resources, but stopped short of endorsing an amount.

Today's report advocates that the national governments that control the fund give Mr. Strauss-Kahn the authority to raise money by issuing bonds, suggesting the politics of getting countries to follow Japan's lead could take too long.
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