Emerging market countries are working on ways to contribute money rapidly to expand the effective firepower of the International Monetary Fund, with the aim of increasing its role in fighting the eurozone sovereign debt crisis.
The talks, which run in parallel to discussions in the eurozone about creating a bigger “bazooka” to intervene in financial markets, are aimed at producing a confidence-boosting announcement by the Group of 20 heads of government summit in early November in Cannes, France.
People familiar with the negotiations said governments were considering either funding an IMF-run special purpose vehicle (SPV) or lending to the IMF by buying special bonds. Although details have not yet been worked out, the increased firepower could be used to finance IMF credit lines to prevent financial contagion from the Greek crisis spreading to Italy and Spain, or to recapitalise European banks.