By staff reporters Zhang Hong, Fang Huilei and Wen Xiu in Beijing, and Li Xin in London

(Caijing Magazine)The biggest winner at the G-20 summit in London on April 2 was the International Monetary Fund, which received pledges for US$ 1.1 trillion, including US$ 500 billion from member countries and US$ 250 billion through the IMF’s special drawing rights (SDR) currency.

But rounding up the cash and overcoming political obstacles within IMF-member countries will be difficult. Despite the summit’s grand promises, some funding details are fuzzy.

The summit also left unanswered questions about the possibility of issuing bonds to raise money for IMF projects, and the future of quota rights for China.

The SDR pledge was based on a currency set up in 1969 and endowed with many roles – a reserve function and trade settlement. SDR’s value is linked to a basket of currencies that includes the U.S. dollar, euro, yen and pound.

To date, the world’s combined outstanding SDR is a slim 21.4 billion SDR. A 1997 IMF decision to double the amount issued through SDR was never approved by the fund’s largest quota holder, the United States, although the latest boost would greatly increase the fund’s resources.

 A former IMF official told Caijing that if countries holding SDR need to “cash” the IMF currency and use the resources for bilateral flows of capital or trade, issuers of the four basket currencies would be obliged to buy SDRs. That’s why many developed countries have been reluctant to expand SDR issuance.

In the wake of the summit and “with the statement made at the G-20,” said the former official, “the Americans can’t oppose the idea (of enlarging SDR) anymore.”

China’s Contribution

The promise of US$ 500 billion in fresh cash was aimed at beefing up confidence in the world economy and showcasing an international determination to fight the current economic crisis together.

How will the money be raised? Technical details “still need to be worked out in time,” said a source close to the negotiations.

Only a few clues point to how member countries might fulfill the huge promise. Japan signed a bilateral lending agreement with the IMF totaling US$ 100 billion. The European Union pledged US$ 100 billion. Canada and Switzerland each promised US$ 10 billion, and Norway put US$ 4.5 billion on the table.

The United States was ambiguous about its contribution. Before the summit, U.S. officials expressed a willingness to add US$ 100 billion to IMF’s resources. But there was no formal statement for such a pledge, which would require approval from Congress.

China’s possible contribution was a matter of curiosity as well.

The host of the summit, British Premier Gordon Brown, tried to convince countries with high foreign reserves such as China and Saudi Arabia to increase lending to the IMF. Although Brown said at the summit press conference that China would contribute US$ 40 billion, that number was confirmed by neither the IMF nor China.

“China’s contribution is out of the consideration for the nation’s own economic strength, not necessarily a match with that of the U.S. or Japan,” a source close to Chinese decision-makers told Caijing.

The source also said the Chinese government wants its contribution to reflect the nation’s strength as well as development stage, taking into consideration the fact that China has been troubled along with the rest of the world by the economic crisis.

The source said China’s pledge was made after considering possible contributions from similar developing countries as well as big foreign reserve holders.