IMF Welcomes Pledges by Members to Increase Fund Resources by Over US$430 billion

IMF Press Release No. 12/147

April 20, 2012

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement today:

“We warmly welcome pledges by our members to increase IMF resources by over $430 billion, almost doubling our lending capacity. This signals the strong resolve of the international community to secure global financial stability and put the world economic recovery on a sounder footing. These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members. They will be drawn only if they are needed, and if drawn, will be refunded with interest.

I would like to express my thanks to all the countries that have already announced specific contributions, which are listed below. I am also grateful to China, Russia, Brazil, India, Indonesia, Malaysia, and Thailand1 and other countries all of whom have indicated that they will be among the contributors.

This broad-based response to our request for additional resources will help strengthen global economic and financial stability in the interests of all our members. We made a call to action, and our members have delivered. By their bold actions, our members have once again shown their firm resolve to stand by the IMF and ensure it has the resources necessary to do its job. In turn we at the Fund commit to safeguard our members’ interests and resources. I am very encouraged by this further demonstration of strong support for the Fund, and I look forward to further commitments from our broader membership.”

Total commitments so far of over US$430 billion to the current effort to increase Fund resources consist of pledges from:

Euro Area €150 billion (about US$200 billion)

Japan US$60 billion

Korea US$15 billion

Saudi Arabia US$15 billion

United Kingdom (US$15 billion)

Sweden at least US$10 billion

Switzerland US10 billion

Norway SDR 6 billion (about US$9.3 billion)

Poland €6.27 billion (about US$8 billion)

Australia US$7 billion

Denmark’s Nationalbank €5.3 billion (about US$7 billion)

Singapore US$4 billion

Czech Republic2 €1.5 billion (about US$2 billion)

TOTAL (3): Over US$430 billion

1 Conditional, Indonesia, Malaysia and Thailand will undertake the necessary domestic consultations to join this international effort, see http://www.imf.org/external/np/sec/pr/2012/pr12148.htm

2Conditional, see http://www.cnb.cz/en/public/media_service/ press_releases_cnb/2012/20120126_pujcka_mmf.html

3 Including China, Russia, Brazil, India, and other countries.

Singapore pledges $5b to IMF
By Aaron Low, The Straits Times, 21 Apr 2012

SINGAPORE will beef up the International Monetary Fund's emergency loan fund, as part of measures to help the global lender tackle any fresh financial crisis.

The Monetary Authority of Singapore (MAS) said last night that it is pledging US$4 billion (S$5 billion) to the IMF, as the global lender seeks extra firepower to deal with the European debt crisis.

The MAS said it is making the pledge as 'part of the broader international effort to provide the Fund with sufficient resources to tackle crisis and promote global economic and financial stability'.

Even if the funds get drawn down, the money will remain part of Singapore's official foreign reserves.

In 2009, the Government made US$2 billion available in contingent loans to the IMF, although it is not known if the IMF has actually used any of those funds.

The IMF has been seeking commitments from its members since the start of the year to raise its lending capacity and boost confidence that it can tackle the sovereign debt problems in Europe.

As of Thursday lunchtime in Washington, a total of US$320 billion in pledges had been made by IMF member countries to help it deal with European problems.

Among the biggest contributors to the emergency fund are the European countries, which have pledged US$200 billion. Next came the US$60 billion pledge from Japan.

Yesterday, the IMF said Britain and South Korea had each pledged US$15 billion while Australia had pledged US$7 billion.

Although the threat that the European debt crisis might turn into a global financial crisis has waned in recent months, there are still worries about the ability of Spain and Italy to settle their debts.

In the past few weeks, Spain and Italian bond yields have risen, which signals that investors are not convinced that the two countries will be able to pay off their debts.

IMF, With Firewall Pledged, Targets Growth and Jobs
IMF, April 21, 2012

IMF members pledge over $430 billion to protective firewall.

Focus now on restoring "normal" level of growth within 2-3 years.

Reaffirm aim to complete quota, governance reforms by October.

The International Monetary Fund (IMF), buoyed by pledges to contribute more than $430 billion to a reinforced anti-crisis firewall, set its sights on rekindling growth, restoring confidence, and creating jobs to put the global economy on a sustained recovery track.

Singapore Finance Minister Tharman Shanmugaratnam, who chairs the policy-setting International Monetary and Financial Committee (IMFC), said ministers and central bank governors gathered in Washington focused on the “real sustainable solutions to this crisis that the firewall is meant to support.”

Calling the strengthening of the global safety net an “important step forward,” he told reporters that the main emphasis must remain on fiscal and structural reforms to put economies on a firmer footing. While getting budgets and debt under control was important, it was equally important to spur growth and get it back to normal levels within 2–3 years. Without growth, fiscal sustainability was not possible.

Collective approach

Christine Lagarde, Managing Director of the IMF, said the spirit and dynamic of the IMF-World Bank Spring Meetings amounted to the “Washington moment” that she had been seeking to drive forward a collective solution to the crisis.

The Group of Twenty (G-20), along with the IMFC, on March 20 announced collective pledges of more than $430 billion to the 188-member IMF—doubling its lending capacity—to help build confidence and prevent crises from spreading.

Although the global economy is slowly improving again, the IMF has said in its latest World Economic Outlook (WEO) report that growth this year is expected to be weak, especially in Europe, and unemployment in many advanced economies will stay high.

Although action by policymakers in Europe and elsewhere has helped to reduce vulnerabilities, risks of a renewed upsurge of the crisis in Europe continue to loom large, along with geopolitical uncertainties affecting the oil market.

Since the start of the global economic crisis in 2007, the IMF has committed more than $300 billion in loans to its member countries. In response to the crisis, the IMF also reformed its policies toward low-income countries and quadrupled its concessional lending.

Strong resolve

Tharman said he saw a courageous and strong resolve to tackle the difficult issues of competiveness, debt, and thrift and build a better future. “We know it’s going to be a long road and a multiyear journey; there will be pitfalls along the way which is why Christine’s umbrella is extremely important,” he said referring to the additional pledges to the IMF.

“It’s a very challenging journey, with politics intersecting with economics.”

Governance changes

In a communiqué, the IMFC reaffirmed “the urgency of making the 2010 quota and governance reforms effective by the 2012 Annual Meetings to enhance the Fund’s legitimacy and credibility.”

The 24-member IMFC urged member countries to ratify the reforms designed to give a larger say to dynamic emerging markets and preserve the voice of poorer countries.

The communiqué emphasized that global collaboration was the key to ensuring stability and rebuilding growth around the world.

The IMFC called on members to complete a financing package for low-income countries.

The Group of 24, which represents developing countries, said in a separate communiqué that they would focus on job creation and social safety nets that protect the poor and vulnerable. They said they were worried by a drop in official development assistance to poorer countries.

At the joint World Bank–IMF Development Committee, delegates said April 21 that growth in emerging and developing economies continued to be relatively strong but poor countries still need support. “Implementing policies and structural reforms to promote poverty reduction and inclusive growth must continue,” the committee said.

Outgoing World Bank President Robert Zoellick stressed the need for boosting employment and protection for the poor. But he said the “best safety net is a job.” Ministers and central bank governors congratulated Jim Yong Kim on his selection as the next World Bank president.

Putting IMF's war chest to good use
Editorial, The Straits Times, 26 Apr 2012

SINGAPORE'S decision to pledge US$4 billion (S$5 billion) loan to the International Monetary Fund (IMF) to help troubled economies must be seen as part of a broader international effort. It is necessary because, as a trading nation, Singapore is critically dependent on the health of the global economy. Should Europe's crisis deepen, it could also spread far beyond the region. Singapore's contribution is therefore an investment made in enlightened self-interest. Even if the funds are drawn down, the money will remain part of Singapore's official foreign reserves.

Singapore will be loaning the money not to the IMF's borrowers but to it directly. This underscores the Republic's recognition of the crucial stabilising role that the IMF plays in containing crises. That recognition is shared by Australia, Britain and South Korea, which joined Singapore last week in increasing the 'precautionary resources' of the IMF. Immediately, these contributions will help the Fund meet the need for additional funds in its war chest to cope with contingencies created by the euro zone crisis. The funds are a kind of firewall that the IMF is trying to build around the problem.

This is well and good but questions need to be asked about any predispositions on IMF's part. There is fear that the US-Europe-Japan axis which dominates the IMF might be a little too willing to accommodate a future bailout of Europe, where Greece, Portugal and Ireland have already drawn about US$130 billion in IMF commitments. Indeed, Canadian Finance Minister Jim Flaherty has suggested that the IMF treated euro zone clients more lightly than it did other crisis-hit borrowers. Others have said many IMF rules were changed to accommodate European countries in a way not seen during the Asian crisis of 1997 or the Latin American crisis in the 2000s. Although the IMF denies any discrimination, it faces pressure to reform shareholder voting rights so as to reflect the growing economic power of the Brics group: Brazil, Russia, India, China and South Africa. Progress has been slow.

The euro zone crisis will test these latent fissures in the global economic system. The IMF is a crisis manager, it is not an alternative to wise national and regional policy-making. As the euro zone struggles to control rising public debt, create jobs and spur economic growth, its members need to adopt a long-term view of economic health. Painful austerity measures have led to street riots in Greece and demonstrations elsewhere, but Europeans need to understand that no one can live indefinitely on borrowed time.

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