Press Release: NAB Participants Agree to Expand Fund's Borrowing Arrangement to up to US$600 Billion
November 24, 2009Press Release No. 09/429
November 24, 2009
The 26 current Participants in the International Monetary Fund’s New Arrangements to Borrow (NAB) met today in Washington D.C. with representatives of 13 potential new Participants and agreed to expand the NAB, including new Participants and increasing credit arrangements to up to US$600 billion. They also agreed to introduce more flexibility to the NAB, a standing set of credit arrangements under which participants commit supplementary resources for International Monetary Fund (IMF) lending when needed.
“This commitment to deliver on the pledge made by G20 leaders to contribute over US$500 billion to an expanded and more flexible NAB demonstrates the continuing multilateral support for the Fund’s response to both this and possible future crises. Today’s agreement is a strong step forward and will help boost confidence and reduce global risks, just as the announcement of the intention to expand and enlarge the NAB was critical in stemming contagion risks and bolstering global financial market confidence earlier this year. The additional flexibility introduced into the NAB is designed to make it an effective tool of crisis management as a backstop for the international monetary system. A formal decision on the expanded NAB is expected to be taken by the Executive Board of the IMF in the coming weeks. Current and potential NAB participants agreed to work quickly to take the necessary measures to make the new enhanced NAB effective as soon as possible,” said Mr. Daisuke Kotegawa, the Chair of the NAB for Japan.
The NAB is reviewed on a regular basis. Agreement was reached that the next review would be conducted following the completion of the 14th Review of Quotas. “It was emphasized that the IMF is a quota-based institution, and NAB participants look forward to the completion of the next quota review by January 2011,” added Mr. Kotegawa, who is also Executive Director for Japan in the IMF.
Mr. Dominique Strauss-Kahn, Managing Director of the IMF, welcomed the accord.
“Today's agreement on an enlarged NAB marks an important moment for multilateralism and the Fund, which will help the IMF’s effectiveness in its response to crises and help strengthen the international financial architecture” Mr. Strauss-Kahn said.
Under the NAB agreement, the Chair rotates annually among participants according to alphabetical order. Thus Japan relinquishes this position as of this meeting in favor of the Republic of Korea.
The NAB is a credit arrangement between the IMF and a group of members and institutions to provide supplementary resources to the IMF when these are needed to forestall or cope with an impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system. It is reviewed on a regular basis.
The unprecedented shock confronting the global economy has led to a sharp increase in the demand for IMF financing. To ensure that the IMF continues to have sufficient resources to meet demand, the Group of 20 economies (G20) reaffirmed their commitment on September 25, 2009 to tripling of the resources available to the IMF, from a pre-crisis level of about US$250 billion. At its meeting in October 2009, the International Monetary and Financial Committee (IMFC) welcomed the expected agreement to expand and enhance the NAB.
The G20 Leaders agreed in April 2009 that immediate financing from members of US$250 billion would subsequently be folded into an expanded and more flexible NAB, increased by up to $500 billion.
IMF Standing Arrangements to Borrow:
Bolstering the Fund’s Lending Capacity:
Where the Fund gets its Money:
Meeting of Current and Potential NAB Participants