RIYADH (November 03 2008): British Prime Minister Gordon Brown said on Sunday he expected Saudi Arabia to pump money into the International Monetary Fund, part of moves to ensure the lender can bail out economies hit by a global financial crisis.
The worst financial crisis in 80 years, which started when a US housing market boom turned sour, has raised fears of recession which one bank official said would spread across the globe hurting even fast-growing economies in Asia and South America.
China was the latest country to fear it might be hit by the downturn, saying it must maintain a fast pace of growth or risk heightening "factors damaging social stability".
Governments have cut interest rates, propped up banks and stepped up state spending to try to spur their economies, but some countries have been forced to turn to the International Monetary Fund (IMF) and other global lenders for help. Brown urged countries with large financial resources, such as oil-producing Gulf states, to contribute to a new IMF facility and said he expected Saudi Arabia to contribute - after some time.
"The Saudis, I think, will contribute so we can have a bigger fund world-wide," Brown told reporters in the Saudi capital, Riyadh, on a tour of the Gulf to also seek investment and help on oil prices.
"The oil producing countries, who have generated over $1 trillion from higher oil prices in recent years, are in a position to contribute."
He next heads to the gas and oil-producing Gulf Arab state of Qatar. Earlier in Kuwait, the finance minister said the government would base any decision to support international markets on potential returns and investment opportunities.
OPEC CUTS:
The IMF, which had $201 billion in loanable funds as of August 28, has offered money to Iceland, Ukraine, Hungary and Belarus to help protect their economies against the crisis. Several other countries are in talks to secure funding.
Officials have said that funds could run very low if many more countries requested help.
Brown said co-operation on getting the world economy through the crisis could create a new global order - "fairer, more stable and offering greater prosperity for all". He will meet other world leaders at a summit in Washington on November 15 to press for reform of the financial system.
Earlier this year oil prices soared to $150 a barrel, making Gulf Arab energy producers even richer. But the crisis has forced oil markets lower.
The president of oil-producing group OPEC, Chakib Khelil, said its members had no choice but to implement agreed output cuts if they wanted a stable oil price between $70-90 a barrel. Asked what effect Brown's visit could have on OPEC's plan to stabilise prices, Khelil said: "Everything depends on the impact on the decision of Saudi Arabia. Therefore, if it slows the cut, or does not do it, then of course there will be an impact on the oil price."
The Organisation of the Petroleum Exporting Countries (OPEC) decided at a meeting in Vienna on October 24 to reduce production by 1.5 million barrels per day or about 5 percent from November 1.
DOWNTURN:
The crisis has struck countries around the world, with Sri Lanka becoming the latest to receive an IMF warning that its growth was at risk. Swiss National Bank Vice-Chairman Philipp Hildebrand said the global economic outlook has "massively deteriorated".
He said the theory of a decoupling of fast growing countries in Asia and South America had turned out to be an "unfulfilled hope". Germany, which is on the brink of recession, hopes to safeguard almost a million jobs with the government's planned stimulus package, Economy Minister Michael Glos said.
China said it feared a downturn in its export markets could hurt many.
"We must be crystal-clear that without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development ... and factors damaging social stability will grow," Premier Wen Jiabao wrote in the Communist Party's ideological journal. Governments have pledged about $4 trillion to support banks and restart money markets to try to stem the crisis set off by the bursting of a US housing market bubble.
In Ireland, a senior HBOS banker said the country would need to recapitalise its banks in the next few months because exposure to the falling property market will undermine their capital bases.
"The government is in denial but they are going to have to recapitalise the Irish banking sector," said Mark Duffy, chief executive of Bank of Scotland, part of the HBOS group, which is being taken over by British rival Lloyds TSB. Portugal's government nationalised a small private bank, Banco Portugues de Negocios (BPN), a finance ministry spokesman said.
The crisis has also stalled privatisations.After Germany said its planned flotation of rail operator Deutsche Bahn was off the agenda, a senior adviser to French President Nicolas Sarkozy said plans to sell off parts of post office operator La Poste would not go ahead for the moment.
