Press Release No. 10/145

Press Release No. 10/145
April 12, 2010

The Executive Board of the International Monetary Fund (IMF) today approved 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 US$500 billion) to SDR 367.5 billion (about US$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 (G-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 US$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 today 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.¹

“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.

Background

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. The NAB is supplementary to quota resources, which are made up of the quota subscriptions each country pays upon joining the Fund, broadly based on its relative size in the world economy. IMF members’ quotas currently total SDR 217.4 billion (about US$330 billion). Like quota allocations, the NAB is reviewed on a regular basis.

The recent 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, leaders of the G-20 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. This call was endorsed by the IMFC. The G-20 leaders reaffirmed their commitment on September 25, 2009 to a 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 IMFC welcomed the expected agreement to expand and enhance the NAB. Pending the entering into force of the expanded NAB, member countries have pledged more than $300 billion in immediate bilateral financing should the Fund require additional resources for lending.

Useful links

Press Release November 24, 2009: http://www.imf.org/external/np/sec/pr/2009/pr09429.htm

G-20 Communiqué April 2, 2009:

http://www.londonsummit.gov.uk/resources/en/news/15766232/communique-020409

IMFC Communiqué April 25, 2009: http://www.imf.org/external/np/sec/pr/2009/pr09139.htm

IMF Standing Arrangements to Borrow: http://www.imf.org/external/np/exr/facts/gabnab.htm

Bilateral borrowing commitments: http://www.imf.org/external/np/exr/faq/contribution.htm

IMF Quotas : http://www.imf.org/external/np/exr/facts/quotas.htm

Where the Fund gets its Money: http://www.imf.org/external/np/exr/facts/finfac.htm

Participants and Amount of Credit Arrangements 1/ (in Millions of Special Drawing Rights)2/       Current Credit Arrangements   New Credit Arrangements       Current Participants                   Australia 801.29   4,370.41   Austria 407.57   3,579.24   Banco Central de Chile 340.00   1,360.00   Belgium 956.60   7,861.85   Canada 1,380.99   7,624.43   Danmarks Nationalbank 367.01   3,207.78   Deutsche Bundesbank 3,518.75   25,370.81   Finland 340.00   2,231.76   France 2,549.29   18,657.38   Hong Kong Monetary Authority 340.00   340.00   Italy 1,752.95   13,578.03   Japan 3,518.75   65,953.20   Korea 340.00   6,583.44   Kuwait 341.29   341.29   Luxembourg 340.00   970.59   Malaysia 340.00   340.00   Netherlands 1,301.85   9,043.72   Norway 378.88   3,870.94   Saudi Arabia 1,760.86   11,126.03   Singapore 340.00   1,276.52   Spain 664.77   6,702.18   Sveriges Riksbank 849.76   4,439.74   Swiss National Bank 1,540.26   10,905.42   Thailand 340.00   340.00   United Kingdom 2,549.29   18,657.38   United States 6,639.83   69,074.27             New Participants                   Bank of Israel     500.00   Brazil     8,740.82   China     31,217.22   Cyprus     340.00   Greece     1,654.51   India     8,740.82   Ireland     1,885.52   Mexico     4,994.76   New Zealand     624.34   Philippines     340.00   Portugal     1,542.13   Russian Federation     8,740.82   South Africa     340.00     Total 3/     367,467.36             1/ Credit arrangements are subject to a minimum of SDR 340 million. 2/ Exchange rate on April 12, 2010: US$1 = SDR 0.655641 3/ Total may not equal sum of components due to rounding.           1 The expanded and modified NAB will become operational (that is to say, drawings could be made under the NAB) when: (i) current participants have agreed to the amendments to the NAB decision and the changes in credit arrangements of current participants, which require the consent of participants representing at least 85 percent of total credit arrangements, including, with respect to the change in credit arrangements, the agreement of each participant whose credit arrangement is changed (this amounts effectively to a consent requirement of 96 percent of current participants); (ii) and new participants accounting for at least 70 percent of the proposed credit arrangements of new participants have adhered to the NAB.