Christine Lagarde, centre, will visit Saudi Arabia for the first time. AFP
Christine Lagarde, centre, will visit Saudi Arabia for the first time. AFP

Lagarde seeks more Saudi cash



Christine Lagarde will make her first visit to Saudi Arabia as the IMF managing director today, seeking more money from the Arab world's biggest economy.

But her call for cash is likely to be met by requests from officials in the kingdom for more power at the fund based in Washington.

"The IMF is in a position where it needs money and Saudi Arabia is in a position where it could boost its contribution," said Jarmo Kotilaine, the chief economist of National Commercial Bank in Saudi Arabia. "But Saudi Arabia is likely to be looking for an increase in its role in return."

The IMF has urged member states to stump up US$500 billion (Dh1.8 trillion) in new lending resources to boost its firepower as it tries to tackle the European debt crisis. Members of the euro zone have said they would contribute about $200bn. The IMF is also looking for contributions from China, Brazil, India and other leading emerging nations.

Saudi Arabia has been one of the most active contributors to the IMF in recent years. It supplies 2.94 per cent of total member funding, compared with 0.32 per from the UAE and 17.7 per cent for the US, the biggest single contributor.

In return, the kingdom has earned itself a 2.8 per cent share of voting rights and its own director's seat on the executive board, which is responsible for the IMF's day to day running.

In contrast, other emerging economies, such as Brazil and India, have to share a director's seat with other countries.

Other wealthy emerging economies including China have hinted that if they provide more funding, they would require a greater say at the IMF in return, either through increased voting shares or trade concessions from Europe.

Andrew Gilmour, a senior economist at Samba Financial Group, said it was unlikely Saudi Arabia would seek a direct increase in its voting rights.

"Saudi is already well represented in the IMF and is unique as having a sole representation on the board compared with other similar countries," he said.

Instead, the kingdom may seek assurances of the IMF's commitment to helping to reform the global economy to ward off future crises, say economists. Together with the EU, it has already pushed Greece, Portugal and Ireland to reform their economies in return for receiving bailout money.

"It's obviously in Saudi Arabia's interests to ensure there's a high degree of economic sustainability and stable growth as even Saudi is not immune to economic vulnerability," said Mr Kotilaine.

If Europe sank into recession, it would have a "notable impact" on global oil demand, Jadwa Investment said in its outlook report for this year.

The fall in demand for oil from Europe is greater than the rise in demand from all emerging markets, said the bank, which is based in Riyadh. The kingdom is relying on high oil prices to fund a $130bn spending spree to create jobs, housing and improve infrastructure.

It will be Ms Lagarde's first visit to Saudi Arabia since June when she was campaigning to be appointed as the IMF's chief.

During that visit, Ibrahim Al Assaf, the Saudi finance minister, said the kingdom was looking for a "greater role" in the fund, the official Saudi Press Agency reported.

Ms Lagarde will arrive from Tunisia today, where she has been to back the country's democratic transition and job-creation plans.

Her visit to both countries was "an opportunity for her to hear their views and concerns at this time," said David Hawley, an IMF spokesman.

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