Gulf call for bigger role in IMF after euro rescue

The IMF should give Gulf states a bigger say in the global economic order in return for the billions of dollars in financial aid they have provided to the distressed country's of Europe, says Saudi Arabia's Prince Turki al Faisal

Our focus will be on developing our domestic economies," says Prince Turki Al Faisal of Saudi Arabia. Nousha Salimi / AP Photo

Saudi Arabia's Prince Turki Al-Faisal yesterday urged the IMF to give Gulf states a bigger say in the global economic order in return for billions of dollars in financial aid to the distressed economies of Europe.

The comments by one of the kingdom's renowned international figures comes as the IMF bids to increase its lending capacity by more than €500 billion (Dh2.3 trillion) to tackle the sovereign debt crisis in Europe. His response also follows last week's visit to the region by European central bankers.

"What we can be certain of is that large developing nations will not agree to provide additional funds without a greater say in the IMF's affairs, and this applies to all global economic governance organisations," Prince Turki told the Global Competitiveness Forum in Riyadh yesterday.

The statements by the former Saudi intelligence chief and ambassador to Washington and London reflect a growing desire by regional economies to have a greater say on the economic world stage as they are increasingly called upon to provide capital as well as hydrocarbons needed to fuel western economies.

It also reflects the need for countries such as Saudi Arabia and its Gulf neighbours to balance requests for funds from international and regional donor organisations with mounting domestic budgetary pressures - as they boost social spending in the wake of the Arab Spring.

"The GCC remains largely an oil-driven economy. 2012 break-even oil prices are just 20 per cent away from current crude prices. As such, our focus will be on developing our domestic economies," Prince Turki said.

The IMF wants to boost its bailout firepower to contain the European debt crisis by erecting a firewall of financial support for distressed European economies and prevent the crisis from spreading.

European finance ministers met in Brussels yesterday to talk about planned new budget rules and work towards a long-term plan aimed at easing the crisis.

Last week a group of European central bank governors visited Abu Dhabi to discuss raising contributions to the fund.

The UAE contribution currently represents 0.32 per cent of total IMF member funding, compared with 2.94 per cent for Saudi Arabia and 17.7 per cent for the US, the biggest contributor.

"Each country decides on its own decision and will take it at their own time," Sultan Al Suwaidi, the UAE Central Bank Governor said after last week's meeting.

Mario Draghi, the European Central Bank president, said last week's meeting reflected the growing presence of GCC states in the global economy. But Prince Turki yesterday indicated that bigger presence may also need to be given a bigger voice.

"The IMF will look to play a larger role within the global economic system, in light of the recurring difficulties and slowing global growth. This will likely require a major increase in its lending resources, which is only possible with the assistance of large emerging market economies, including China, India, or Saudi Arabia, which have the resources to back a further increase at a time when developed economies are on the brink of a renewed recession."

The IMF is funded by a charge known as a quota paid by its members. While it is largely based on a country's wealth, some analysts say it does not reflect the world's fast-changing economic order and is unfairly weighted towards developed nations. The US has about 421,000 votes under the existing system to Saudi Arabia's 108,000. The UAE controls more than 8,000 votes.

GCC states accrued some US$912bn (Dh3.3tn) in foreign assets in the five years before the 2008 financial crisis according to Georgetown University's Centre for International and Regional Studies. Sovereign wealth funds from those countries also figured largely in the subsequent bailout of western financial institutions.