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Lagarde highlights IMF funding worries

The International Monetary Fund lacks the financial firepower needed to support all the countries embroiled in the debt crisis, the Washington-based lender’s head suggests.

A memo sent by Christine Lagarde (pictured), the managing director of the IMF, to the fund’s steering committee says its resources are adequate for the time being but may be unable to meet the demands of any escalation in the crisis playing out on the eurozone’s periphery.

“Our lending capacity of almost $400 billion [£253.2 billion] looks comfortable today but pales in comparison with the potential financing needs of vulnerable countries and crisis bystanders,” the briefing reads.

“It will be useful to discuss, soon, the needs and contingency options.”

Lagarde adds that further action is needed by member countries to bring in the fund’s quota reforms agreed in 2010 and keep the review of quotas scheduled for 2013 on track.

She also warns that the IMF’s “credibility, and hence effectiveness,” depends on its perceived capacity to respond to worst-case scenarios.

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