April 12, 2010IMF Boosts Credit Line Against Crises to $550 Billion
The International Monetary Fund’s board of directors approved a 10-fold increase in the size of a credit line designed to stem financial crises, adding contributors such as China to the $550 billion pool.
“This will help ensure that the Fund has access to adequate resources to help members that are vulnerable to financial crises,” IMF Managing Director Dominique Strauss-Kahn said today in an e-mailed statement.
The IMF in November announced an expansion of the credit line to as much as $600 billion pending approval by the board.
The deal fulfills an April 2009 pledge by leaders of the Group of 20 to boost the IMF’s resources. The worst financial crisis since the Great Depression has prompted nations including Iceland, Ukraine and Hungary to seek aid from the IMF, which was created after World War II to help ensure the stability of the global monetary system.
Thirteen countries are planning to join the current 26 members of the so-called New Arrangements to Borrow, the Washington-based institution said.
When today’s decision is implemented, it will merge existing commitments into one facility, making it easier for the IMF to tap into its supplemental resources.
The agreement, which still has to be approved by some countries’ legislators, also eased rules governing the credit line, allowing member countries to activate it for up to six months instead of having to approve each separate loan, an IMF official who spoke on condition of anonymity said to reporters in Washington last week.
Capacity to Commit
For now, the IMF has a capacity to commit more than $244 billion through permanent resources and bilateral commitments, the IMF official said.
China, India, Russia and Brazil are contributors to the NAB for the first time through the purchase of notes. Together, the so-called BRIC nations will together have more than 15 percent of votes, the new threshold to block activation of the new credit line, Paulo Nogueira Batista, Brazil’s executive director at the IMF, said today in an e-mail.
The IMF estimated that its current credit line and its permanent resources were insufficient when the financial crisis boosted demand for loans. It then started to borrow from individual members, such as Japan, to continue lending to countries in difficulty.
To ensure the institution would continue shoring up economies around the world, G-20 leaders in April 2009 pledged to add $500 billion to the IMF’s resources.
Some of these contributions were bilateral loans, while China agreed to participate by buying the first IMF notes. Some countries, like the U.S., contributed directly to the NAB.
The deal fulfills an April 2009 pledge by leaders of the Group of 20 to boost the IMF’s resources. The worst financial crisis since the Great Depression has prompted nations including Iceland, Ukraine and Hungary to seek aid from the IMF, which was created after World War II to help ensure the stability of the global monetary system.
Thirteen countries are planning to join the current 26 members of the so-called New Arrangements to Borrow, the Washington-based institution said.
When today’s decision is implemented, it will merge existing commitments into one facility, making it easier for the IMF to tap into its supplemental resources.
The agreement, which still has to be approved by some countries’ legislators, also eased rules governing the credit line, allowing member countries to activate it for up to six months instead of having to approve each separate loan, an IMF official who spoke on condition of anonymity said to reporters in Washington last week.
Capacity to Commit
For now, the IMF has a capacity to commit more than $244 billion through permanent resources and bilateral commitments, the IMF official said.
China, India, Russia and Brazil are contributors to the NAB for the first time through the purchase of notes. Together, the so-called BRIC nations will together have more than 15 percent of votes, the new threshold to block activation of the new credit line, Paulo Nogueira Batista, Brazil’s executive director at the IMF, said today in an e-mail.
The IMF estimated that its current credit line and its permanent resources were insufficient when the financial crisis boosted demand for loans. It then started to borrow from individual members, such as Japan, to continue lending to countries in difficulty.
To ensure the institution would continue shoring up economies around the world, G-20 leaders in April 2009 pledged to add $500 billion to the IMF’s resources.
Some of these contributions were bilateral loans, while China agreed to participate by buying the first IMF notes. Some countries, like the U.S., contributed directly to the NAB.
AP
