|
As
contingency, IMF aims to double its lendable resources
-
In precautionary move, IMF aims to double resources
to $500 billion
-
MF has adequate funding to deal with curreant stage
of economic crisis
-
Plans aim to boost confidence that IMF can meet further
demands
The
IMF aims to double the amount of money it has available
to lend to governments to $500 billion to strengthen
international confidence that it can meet any new challenges
during the current global downturn, in case more countries
are forced to turn to the 185-member institution to
borrow, the deputy head of the IMF said.
“Right now the IMF has adequate resources to respond
to the demands that we see in front of us immediately,”
IMF First Deputy Managing Director John Lipsky said
during a panel discussion at the World Economic Forum
in Davos last week.
“However, we think it is prudent at this time,
to add contingent facilities that would double the resources
available to us. We have, through quotas and existing
borrowing agreements, $250 billion in total. We thought
it prudent to add another $250 billion at this time.”
The IMF Executive Board is expected to consider a number
of suggestions for boosting the IMF’s resources
shortly.
In its latest assessment published on January 28, the
IMF says that world growth is forecast to fall to its
lowest level since World War II, with financial markets
remaining under stress and the global economy taking
a sharp turn for the worse, sending both global output
and trade plummeting.
The IMF has so far committed $47.9 billion in lending
to a number of economies affected by the crisis, including
Belarus, Hungary, Iceland, Latvia, Pakistan, Serbia,
and Ukraine. It announced a precautionary loan for El
Salvador last month and an IMF team is also in negotiations
with Turkey. Other countries may need financing in due
course.
Japan has offered to lend the IMF $100 billion. Lipsky
said the IMF aimed to raise an additional $150 billion.
“I want to make clear that this is contingent facilities
to give confidence that we have the resources to respond
if needed.”
He did not specify what other countries may provide
the additional resources, although Lipsky did mention
in an interview with the Wall Street Journal that the
IMF could consider issuing bonds.
Capital flows to emerging markets have slumped in recent
months, leaving those with large current account deficits
vulnerable.
“The IMF wants to make its finances bullet proof
so that it can lend to any emerging economies that experience
a sudden withdrawal of funds,” the Financial Times
said.
Speaking during the same panel discussion at Davos,
Montek Singh Ahluwalia, the Deputy Chairman of India’s
Planning Commission and a former head of the IMF’s
watchdog known as the Independent Evaluation Office,
said an extra $250 billion was a “very modest”
proposal given the amount of resources being deployed
in some advanced economies to counter the crisis.
He suggested two alternatives to tapping a few countries
for the $250 billion in extra funding.
-
A tripling of the IMF’s quotas—capital provided
by member countries
-
A generalized issue of the IMF’s Special Drawing
Rights (SDRs), which supplement the existing official
reserves of member countries.
Lipsky said that with adequate policy response by
governments, including fiscal stimulus in advanced
economies and some emerging markets, the world could
see a revival of economic growth toward the end of
2009 “and a return over the next year to trend
growth. But decisive action will be needed.”
In other points, Lipsky said that
-
A restoration of the health of the financial system
was a precondition for economic recovery
-
Governments must not fall into the “seductive
trap” of focusing only on national priorities
at the expense of international health
-
The fall in oil prices and continued domestic spending
by oil exporters would be an important source of support
for the global economy
Both Ahluwalia and—during a separate discussion—South
Africa’s Finance Minister Trevor Manuel said that,
in addition to extra capital, the IMF needed reforming
to improve representation of emerging markets and other
developing countries. European countries, for example,
should not have so many seats on the Executive Board,
said Manuel, who is chairing a committee on IMF governance
reform that is expected to report in April.
Reform of the IMF should be a critical part of the agenda
for the Group of Twenty (G-20) industrialized and emerging
market leaders who will meet in London on April 2, said
Ahluwalia.
“I’m very clear that we need an IMF, but what
we’re doing is taking the IMF we invented in 1945
and putting Band-Aid on all kinds of bits and pieces.
You need to go back a little bit to the drawing board.
And that is what the G-20 ought to be focusing on,”
he said.
|
