MercoPress. South Atlantic News Agency

IMF Emergency financing mechanism has 200 billion USD

The International Monetary Fund, which has announced its readiness to act in support of nations hit by fallout from the global financial turmoil, is holding talks with several countries about possible new lending programs. According to an official release IMF has 200 billion US dollars ready for loans.

"I have been on the phone with leaders in several capitals who have asked the Fund for assistance. We now have mission teams in some of these countries assessing their needs and, where asked to do, discussing programs that could be supported by an IMF loan," said IMF Managing Director Dominique Strauss-Kahn. The IMF is currently discussing possible loan packages for Hungary, Iceland, Pakistan and Ukraine. It is also in discussions with a number of other countries about possible financing needs, and is providing confidential policy advice to governments in emerging and developing economies on how to adapt to the current turmoil "We are actively engaged at this critical time with several governments around the world, both to provide technical economic advice and financing, if necessary. We are ready to act very quickly, with streamlined conditions attached," says Strauss-Kahn. The IMF recently activated the Emergency Financing Mechanism, a procedure for speeding up lending in a crisis, which has been used six times previously since it was set up in 1995. "IMF has more than 200 billion US dollars of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries", said an official release from the multilateral organization. Strauss-Kahn says that although some policy conditions will still be attached to loans from the IMF, the conditions will be fewer and more targeted than in the past. Given that the IMF is a financial institution, its lending has to be accompanied with some policy conditions, he adds. However, he told IMF staff recently that "conditionality has to be defined as what is needed to achieve the goals of the program... it should not attempt to fix the world." These measures must be directly related to achieving the goals of the program, he emphasized. Under the Emergency Financing Mechanism, IMF management informs the Board of Directors of the intention to activate emergency procedures and provides reasons for doing so; a short written report is circulated as soon as feasible, describing the member's economic situation; once agreement with the authorities has been reached on a lending program, the IMF staff report is circulated, and the Board considers the request for a loan within 48-72 hours. The rules state that member's past cooperation with the IMF has a strong bearing on the speed with which the Fund can assess the situation and agree on necessary corrective measures to put the economy back on track.