MercoPress. South Atlantic News Agency

IMF boosts new emergency lending facility ten fold to 550 billion USD

IMF Managing Director Dominique Strauss-Kahn

The Executive Board of the International Monetary Fund (IMF) approved Monday a ten-fold expansion of the Fund’s New Arrangements to Borrow (NAB) and the transformation of the Fund’s premier standing credit arrangement into a more flexible and effective tool of crisis management.

The NAB will be increased by SDR 333.5 billion (about 500 billion USD) to SDR 367.5 billion (about 550 billion), representing a major increase in the resources available for the Fund’s lending to its members.

This responds to the call by the leaders of the Group of 20 economies, endorsed by the International Monetary and Financial Committee (IMFC), to increase the financing available to the Fund, through an expanded and more flexible NAB increased by up to 500 billion.

Thirteen new participants, including a number of major emerging market economies, have indicated their willingness to join 26 current participants in the NAB. The decision follows the agreement reached by current and prospective participants at their meeting in Washington in November 2009 on the key elements of an expanded and more flexible NAB.

“The expansion and enlargement of the NAB borrowing arrangements provides a very strong multilateral foundation for the Fund’s efforts in crisis prevention and resolution, as an essential back-stop to the Fund’s quota resources. 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.

The NAB is a standing set of credit arrangements under which participants commit resources to IMF lending when these are needed to supplement quota resources. The expanded NAB will become operational when it receives formal acceptances from the required proportion of current and potential participants, which will require legislative backing in some cases.

“The expansion of the NAB will make an important contribution to global financial stability, but it is not a substitute for a general increase in the Fund’s quota resources. The Fund is, and shall remain, a quota-based institution. It is important now that member countries rapidly take the necessary steps to make the increased resources available,” Mr. Strauss-Kahn underscored.

The list of new participants includes: Israel, Brazil, Chile, Cyprus, Greece, India, Ireland, Mexico, New Zealand, Philippines, Portugal, Russian Federation and South Africa.