BRUSSELS (AP) — The International Monetary Fund said Wednesday that it's aiming to increase its financial firepower by around $500 billion so it can give out new loans to help mitigate a worsening financial crisis.
Responding to widespread speculation surrounding its funding requirements, the Washington-based institution said its staff estimates that countries around the world will need about $1 trillion in loans over the coming years. Most of the concerns center on the 17-nation eurozone, which has been embroiled in a debt crisis for around two years.
"At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations with the Fund's membership have been completed," a Fund spokesman said in a statement.
Thanks to some $200 billion that European countries have recently promised to the IMF, it is already more than one third on its way to reaching its fund-raising goal.
The IMF has put up about a third of the financing of the eurozone's bailouts over the past two years, but there are growing worries that non-European countries will also need more help given the worsening economic outlook.
Earlier, its sister organization, the World Bank, urged emerging countries that they have to be ready for a severe global downturn if the crisis in the 17-nation eurozone intensifies.
The eurozone, in particular, has been pushing countries around the globe to give more funds to the IMF in the hope that it would build up a larger firewall to stop the continent's debt troubles from spreading to large economies like Spain, Italy or even France.
But so far, even countries relatively flush with cash as China or Brazil have been reluctant to put up more money for Europe. The United States is also reluctant to increase the fund's resources.
Eswar Prasad, a former top IMF official who now teaches economics at Cornell University, said emerging market countries may have started to see the need for such support because Europe's debt crisis has begun to cut into their exports. He said also that concern about possible European bond defaults is triggering a flight to safety. That means less capital is flowing to emerging markets.
"There is a sense among many countries that the problems of Europe are beginning to wash up on their shores so some action must be taken," Prasad said.
Prasad expects the issue will be discussed Thursday at a meeting of deputy finance ministers for Group of 20 countries in Mexico City. But he does not expect a decision until the G-20 finance ministers meet on Feb. 24-25 in Mexico City.
Prasad said he did not expect the Obama administration to change its position. He expects it will continue to oppose more U.S. support to the IMF.
"The United States is almost certainly not going to put any more money on the table," Prasad said. "Even if the administration wanted to do it, there is little chance they could get it through Congress."
British Prime Minister David Cameron said Wednesday that the government would be prepared to back an increase but that he would require approval from his Parliament.
"We believe the IMF must always lend to countries, not to currencies," Cameron said at a news conference with Italian Premier Mario Monti. "We would only act if that was with others, not just as part of a eurozone measure.
However, Cameron said it's up to the eurozone itself to prove that it's "standing behind its own currency."
How the IMF's fund-raising goal will be reached is set to be discussed at a meeting of finance ministers of the Group of 20 leading economies in Mexico next month.
David Stringer in London and Martin Crutsinger in Washington contributed to this story.