US Says More Needs to be Done for Crisis Response

The International Monetary Fund's credit line for crisis-struck countries should surge to as much as $500 billion if it were up to Timothy Geithner, U.S. Treasury secretary. His proposal exceeds IMF's own call to double its present funding of $250 billion.Geithner is upping the stakes in an apparent challenge to the Group of 20 nations, whose finance ministers will meet in London this weekend, to take "forceful" actions.The U.S. is set to propose a massive expansion of the New Arrangements to Borrow – tenfold to be exact, from $50 billion to $500 billion. NAB is a credit line of supplementary resources between IMF and 26 members and institutions set up in the aftermath of the Mexican financial crisis in 1994.Geithner signaled the U.S. government's readiness to take a lead role in navigating the world through a deepening crisis. He called on the world's developed nations to act as aggressively as well as pitched for the expansion of the G-20 membership.But how aggressive can the developed world be really considering they themselves are reeling from a crisis springing from their own shores? IMF set a benchmark of setting aside 2 percent of gross domestic product for fiscal stimulus measures from now until 2010, which Geithner called "reasonable."However, even IMF acknowledged that rich nations are not meeting their commitments. "The G-20 countries are currently falling short of this objective and there will be a withdrawal of discretionary fiscal stimulus in 2010," the fund said.For one, the U.K.'s discretionary spending is expected to fall from 1.4 percent of GDP this year to minus 0.1 percent in 2010, reported the Financial Times.At the same time, G-20 leaders will look into developing early warning systems to detect similar crises. Is it possible to anticipate the bursting of a bubble? After all, hardly anyone saw this one coming.Reform is one proposition that should benefit the world in the long term, particularly governance reform of international financial institutions, suggested Geithner.

About the author

  • Josefa Cagoco

    Sef Cagoco served as one of Devex's international development correspondent from mid-2008 to mid-2009. Her writing focused on social entrepreneurship and multilateral agencies such as the U.N. and Asian Development Bank. She previously worked as senior reporter for the national daily BusinessWorld and a production journalist for the Financial Times.