The Government would be forced to borrow almost $4 billion it has promised to the International Monetary Fund's new bailout fund for Europe but says if the money is called for, it will be repaid.
Finance Minister Bill English said today he didn't expect the money would be needed because Europe had "significant resources" to solve its own debt problems, but said New Zealand had to contribute to the fund because it relied on borrowing from international markets.
Overnight offers from countries around the world grew the IMF's fund to NZ$570b, the Wall Street Journal reported.
It follows the G20 nations in April agreeing to boost the IMF's resources amid the Euro zone's worsening debt crisis.
New Zealand yesterday pledged $1.26b as a stand-by loan facility, which along with an earlier pledge two years ago takes the money offered to almost $4b.
English said the IMF had so far called up about $300m of that.
"Any further calls would be the result of a collective decision in the IMF that action was needed," he told Radio New Zealand.
Europe had to sort out its own political process because it had significant resources.
"It just doesn't have a very good decision making process for using that resource. The IMF won't be marching in there to save Europe if the Europeans aren't making the efforts themselves to make sound decisions."
However, the Government expected Europe would work their way through the debt crisis.
It was important that New Zealand pledged money to the fund because it had one of the highest levels of debt to foreigners.
"It would always be our first preference not to be doing this. (But) we have a significant proportion of our economy in international trade, more than Australia, so we have an interest in global stability which is why we participate."
While New Zealand's gross debt would increase, it would also be considered an asset because it was lending that would be repaid.
The pledge will have no impact on the Government's track to surplus.
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