Financier George Soros said the G20 summit next month must support developing nations to prevent further market turmoil.
“Institutions such as the International Monetary Fund face a novel task: to protect the periphery countries from a storm created in the developed world,” he wrote in a column published in the Financial Times on Monday. “If the periphery economies are allowed to collapse, the developed countries will also be hurt,” he added.
The World Bank has called on wealthier countries to pledge 0.7% of their economic stimulus packages for a “vulnerability fund” to help poorer nations. Leaders of the world’s developed and emerging economies meet in London on April 2 to discuss how to deal with the financial crisis.
Soros said plans to double the resources available to the IMF to tackle crises would help specific countries but not provide a systemic solution for less developed countries.
However, additional Special Drawing Rights (SDRs), the right to call on IMF assets, could solve the problem, he added, calling on rich countries to lend their allocations to nations in need.
“Recipient countries would pay the IMF interest at a very low rate, equivalent to the composite average treasury bill rate of all convertible currencies.”
Soros said there should be a big annual issues of SDRs, of $250 billion, as long as the recession lasts.
“It is too late to use the April 2 G20 meeting to agree this, but if it were raised by (US) President Barack Obama and endorsed by others, this would be sufficient to give heart to the markets and turn the meeting into a resounding success.” (Reuters)