The Group of 20 leading economies had agreed to increase the resources of the International Monetary Fund to help stem the European debt crisis, but hadn?t decided how to do so, said EU president Herman Van Rompuy on Friday.

Earlier, India and other emerging economies had seized the opportunity created by the unprecedented demand from the developed world for flexible IMF loans to push for the reform and increased democratisation of the world body. According to sources, in a pull-aside at the G20 summit, the Brics (Brazil, Russia, India, China and South Africa) heads of governments reached a consensus that any multilateral support from the Brics to the proposed euro zone bailout package for Greece must be routed through the IMF.

The common Brics view on modernising the IMF and multiplying its ?free resources? was despite the possibility that China, the largest exporter to EU, might lend directly to the region?s rescue fund EFSF though such a measure obviously entails greater risk (you aren?t lending to a sovereign but a special vehicle).

Brics leaders felt that for the IMF to be able to shoulder its increased responsibility in a changed world, it ought to be strengthened with additional ways to find resources for helping the newer set of countries (developed ones) experiencing balance of payment problems and a further shift in quotas to the emerging economies. There could also be changes in the Washington-headquartered Fund?s ?supposedly old-fashioned? funding conditions given the severe liquidity constraints faced by many developed countries, Planning Commission deputy chairman Montek Singh Ahluwalia told reporters after Thursday?s BRICS meeting.

According to Ahluwalia, the leaders of Brics countries appreciated the need for the IMF to open new (flexible) credit lines for liquidity starved European countries, but they wanted the Fund?s future assistance to emerging market economies to be similarly structured. ?(In the changed scenario,) We do want the IMF to keep in mind the needs of developing countries, many or which might be hit unintentionally.?

He said that lending to the euro zone countries through the IMF could even be viewed as ?good investments?. ?These are borrowed funds/interest-bearing loans, not grants,? he said, adding, from an investor?s perspective, IMF assets could be more attractive than the US treasury bills at present.

IMF, he said, ought not to be viewed as a development financial institution but a provider of liquidity to countries it reckons are solvent. ?When the market perceives a sovereign as insolvent, the IMF will have to make an assessment of its own and might bet on the country?s solvency. Given the possible spillover effects of the crisis in the euro zone, it is the IMF?s job to do surveillance of the situation,? he said.

Ahluwalia said a key weakness of the euro zone was that the currency bloc was not a fiscal union. The euro zone countries, he said, were willing to take legally binding commitments in a couple of years to force themselves to have ?balanced budgets?.

Last November?s G20 Seoul Summit announced a 6% shift of quota shares to emerging economies in the Fund as part of package of IMF?s governance reforms. It was also decided then that the ?dynamic process? of enhancing the voice of emerging markets and developing countries would be continued and the next general review of the quotas would be completed by January 2014.

IMF?s free sources now are only some $250 billion at present. If the fund wants to give liquidity support to developed countries, its resources have to many multiples of that.

Various ways for enhancing the IMF?s resources are under discussion, Ahluwalia said.

The proposed second bailout package for Greece spearheaded by fellow euro zone countries envisages private lenders voluntarily taking losses and an EU-IMF-supported package.