The Group of 20 is considering injecting billions of dollars into the world economy through the International Monetary Fund to increase global liquidity, G20 sources said on Thursday.
The idea being discussed is to replicate a 2009 decision by G20 leaders that agreed to a special allocation of $250 billion (155 billion pounds) of IMF Special Drawing Rights, the IMF's internal unit of account, to its 187 member countries.
G20 European sources said that French President Nicolas Sarkozy was pushing to include a reference to the SDR allocation in a final G20 communique on Friday.
Some members could choose to sell part or all of their new SDR allocations to other members in exchange for hard currency, for example to meet balance of payments needs, while other members could buy more SDRs as a means of reallocating their reserves.
G20 sources said euro zone countries, worried about the sovereign debt crisis, were talking about the possibility of pooling their SDR allocations in some way.
One source from a large emerging market country said that if euro zone countries combined their SDR allocations, it could make available roughly $200 billion to Europe.
The IMF created SDRs in 1969 as a way to support its member countries. They are allocated according to members' IMF quotas, which are broadly based on a country's relative size in the world economy and which determines its voting power.
The idea of a special SDR allocation was raised during G20 discussions on increasing IMF resources to boost the institution's firepower to tackle future crises.
One European source said a figure of $1 trillion was mentioned as a potential target for the increase in IMF lending resources, although the person emphasized there was no formal number.
There is growing concern that Greece could face a disorderly default, with potentially powerful repercussions for other highly indebted countries such as Italy.
There is a realization the fund can play a role, and it needs to be adequately resourced and have the right facilities to play that role, one G20 official said. That sense is in every delegation.
The G20 will be specific in their determination to increase resources, but it is unclear how specific they will be, another G20 source said.
The G20 is expected to endorse a new IMF credit line to help countries facing economic shocks beyond their control, a G20 official familiar with the matter said on Thursday.
The new Precautionary and Liquidity Line would be built into an existing credit facility for good performing countries facing balance of payment needs caused by exogenous shocks.
The official said IMF member countries would have to request the line the credit, which would be made available over a period of six months without IMF conditions. The amount of financing would be capped at about 500 percent of each members' IMF quota, or subscription.
The IMF board is set to discuss the proposal next week, although approval by the G20 would lend political momentum.
Asked whether such a line of credit would be available to countries such as Italy or Spain, which are facing market pressures from the debt crisis in Greece, the official said: It would not be a good characterization.
(Additional reporting by Abhijit Neogy and Daniel Flynn)