Geithner urges G20 to fund IMF-led stimulus

Tim Geithner, US Treasury secretary, yesterday urged the world's biggest industrialised countries to commit 2 per cent of their total gross domestic product during the next two years in a co- ordinated effort to stimulate the global economy.

Mr Geithner said the International Monetary Fund should oversee the stimulus programme and increase its own capacity by $500bn to help restore growth in emerging markets.

“Forceful financial sector actions are critical to rebuild confidence, restore market functioning, get credit flowing and bring stability to the global financial system,” Mr Geithner said.

He argued that G20 nations must act together to ensure that markets such as derivatives have better oversight and called for a “framework of capital requirements” to provide a better buffer in bad times. He said that global co-operation was needed to create tools to combat economic crises amid a fast evolving international financial system.

“There has been a lot of talk about reform,” Mr Geithner said. “Now is the time for action.”

The IMF estimates that the global economy will contract by 0.5 per cent in 2009 and that world trade is likely to shrink by 3 per cent or more this year.

The expanded IMF capacity should be achieved through the existing New Arrangements to Borrow scheme, Mr Geithner said, suggesting that membership be broadened to include more G20 countries. He also said the Obama administration would soon submit legislation to Congress to mobilise IMF gold to help cover additional expenses.

Mr Geithner also urged reform of the Financial Stability Forum so it includes all G20 countries, giving it a stronger mandate.