Press Release: IMF Executive Board Approves Major Expansion of Fund’s Borrowing Arrangements to Boost Resources for Crisis Resolution

IMF News, April 12, 2010

Source details

Canonical URL: Press Release: IMF Executive Board Approves Major Expansion of Fund’s Borrowing Arrangements to Boost Resources for Crisis Resolution

The Executive Board 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 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).
Purpose: to provide a stronger multilateral foundation for the Fund’s efforts in crisis prevention and resolution as a back-stop to the Fund’s quota resources and to ensure access to adequate resources for members vulnerable to financial crises.

The expansion responds to a call by leaders of the Group of 20 (G-20) economies, endorsed by the International Monetary and Financial Committee (IMFC), to increase financing available to the Fund through an expanded and more flexible NAB increased by up to US$500 billion.
Thirteen new participants, including several major emerging market economies, indicated willingness to join 26 current participants in the NAB.
The decision follows agreement reached by current and prospective participants at their meeting in Washington in November 2009 on key elements of an expanded and more flexible NAB.
IMF Managing Director Dominique Strauss-Kahn emphasized that the expansion is an important contribution to global financial stability but “is not a substitute for a general increase in the Fund’s quota resources. The Fund is, and shall remain, a quota-based institution.”

The NAB is a standing set of credit arrangements under which participants commit resources to IMF lending 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.
IMF members’ quotas currently total SDR 217.4 billion (about US$330 billion).
The NAB is supplementary to quota resources and, like quota allocations, is reviewed on a regular basis.

The global shock confronting the world economy led to a sharp increase in demand for IMF financing.
G-20 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; this call was endorsed by the IMFC.
G-20 leaders reaffirmed on September 25, 2009 a tripling of resources available to the IMF from a pre-crisis level of about US$250 billion.
Pending the entering into force of the expanded NAB, member countries pledged more than $300 billion in immediate bilateral financing should the Fund require additional lending resources.

Total NAB after expansion: 367,467.36 (in Millions of Special Drawing Rights)3/
Exchange rate on April 12, 2010: US$1 = SDR 0.655641
Examples of current participants (Current Credit Arrangements → New Credit Arrangements):
- 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: 2,231.76
- France: 2,549.29 → 18,657.38
- Italy: 1,752.95 → 13,578.03
- Japan: 65,953.20
- Korea: 6,583.44
- Netherlands: 1,301.85 → 9,043.72
- Norway: 378.88 → 3,870.94
- Saudi Arabia: 1,760.86 → 11,126.03
- Singapore: 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
- United Kingdom: 6,639.83 → 69,074.27
- United States: 6,639.83 → 69,074.27
Examples of new participants (proposed New Credit Arrangements):
- Bank of Israel: 500.00
- Brazil: 8,740.82
- China: 31,217.22
- Greece: 1,654.51
- India: 1,885.52
- Mexico: 4,994.76
- New Zealand: 624.34
- Portugal: 1,542.13
- Russian Federation
- South Africa
Footnotes:
- 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.

The expanded and modified NAB will become operational 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); and
- (ii) New participants accounting for at least 70 percent of the proposed credit arrangements of new participants have adhered to the NAB.

The expansion is intended as a major increase in resources available for the Fund’s lending to members and as an essential back-stop to quota resources.
IMF leadership underscored the importance of member countries rapidly taking necessary steps to make the increased resources available.
The expansion contributes to global financial stability but does not replace the need for a general increase in the Fund’s quota resources.

Source: IMF Press Release No. 10/145 (April 12, 2010).