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IMF Standing Borrowing Arrangements -- March 2010

IMF Standing Borrowing Arrangements -- March 2010

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Published by: FloridaHoss on Apr 13, 2010
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External Relations Department
Washington, D.C. 20431
Telephone 202-623-7300
Fax 202-623-6278
IMF Standing Borrowing Arrangements
While quota subscriptions of member countries are the IMF’s main source of financing,the Fund can supplement its resources through borrowing if it believes that resourcesmight fall short of members’ needs. Through the General Arrangements to Borrow (GAB)and the New Arrangements to Borrow (NAB), a number of member countries and institutions stand ready to lend additional funds to the IMF.
The GAB and NAB are credit arrangements between the IMF and a group of member countries and institutions to provide supplementary resources of up to SDR 34 billion (about$52 billion) to the IMF to forestall or cope with an impairment of the international monetarysystem or to deal with an exceptional situation that poses a threat to the stability of that system.
Agreement to triple the IMF’s lending resources by expanding the NAB
On April 2, 2009, the Group of Twenty industrialized and emerging market economies (G-20)agreed to increase the resources available to the IMF by up to $500 billion (which would triplethe total pre-crisis lending resources of about $250 billion) to support growth in emergingmarket and developing countries. This broad goal was endorsed by the International Monetaryand Financial Committee in itsApril 25, 2009 communiqué. This resource increase is to bemade in two steps:
first, through immediate bilateral financing from IMF member countries;
second, by subsequently incorporating this financing into an expanded and moreflexible NAB. On September 25, 2009 theG-20 announcedit had delivered on itspromise to contribute over $500 billion to a renewed and expanded NAB.Currently, the Fund has twelve bilateral loan agreements worth about $184 billion and threebilateral note purchase agreements for about $69 billion. More agreements are expected to beadded soon. In addition, on November 24, 2009 the current 26 NAB participants andrepresentatives of 13 potential new participants agreed to make the NAB more flexible andexpand it to up to $600 billion. The next steps in this process would be for the Executive Board of the IMF to take a formal decision and NAB participants, current and new, to take the necessarydomestic procedures, including legislative approval, to participate in the expanded NAB.
Why the GAB was established and how it works
The GAB enables the IMF to borrow specified amounts of currencies from 11 industrialcountries (or their central banks), under certain circumstances, at market-related rates of interest. The potential amount of credit available to the IMF under the GAB totalsSDR
17 billion(about $26 billion), with an additional SDR 1.5 billion available under an associatedarrangement with Saudi Arabia.The GAB, established in 1962, has been renewed ten times, most recently inNovember 2007for a five year period from December 2008. In response to the growing pressures onthe IMF’s resources caused by the emergence of the debt crisis in Latin America in 1982, abroad review was undertaken in 1983. It resulted in a substantial increase in the credit lines,from about SDR 6 billion to SDR 17 billion. Other major amendments to earlier GABprovisions permit the IMF to use it to finance lending to nonparticipants in the GAB, if theIMF faces a situation where it has inadequate resources of its own. The earlier GAB carried
- 2 -a rate of interest below market rates; this rate was raised at the time of the GABenlargement
and made equal to theSDR interest rate.
NAB established to supplement GAB resources
 The NAB is a set of creditarrangements between the IMF and26 member countries andinstitutions (under the expandedNAB 13 new participants could beadded to this list). It was proposedat the 1995 G-7 Halifax Summitfollowing the Mexican financialcrisis. Growing concern thatsubstantially more resources mightbe needed to respond to futurefinancial crises promptedparticipants in the Summit to call onthe G-10 and other financiallystrong countries to developfinancing arrangements that woulddouble the amount available to theIMF under the GAB. The IMF’sExecutive Board adopted adecisionestablishing the NAB, with effectfrom November 1998.The NAB has been renewed twice,most recently inNovember 2007for a further period of five years from November 2008.Importantly, the NAB is the facility of first andprincipal recourse vis-à-vis the GAB except inlimited circumstances (involving Fund credit to amember that is a participant of both the GAB andNAB, or where a proposal for calls under the NABis not accepted). The maximum amount of resources available to the IMF under the NAB andGAB is SDR 34 billion (about $52 billion).
Commitments from individual participants arebased predominantly on relative economicstrength, as measured byIMF quotas. An IMFmember country or institution that is not currently aparticipant in the NAB may be accepted as aparticipant at the time of a renewal of the decision,if the IMF and participants representing 80 percentof the total credit arrangements agree. Chile’sparticipation in the NAB was approved in 2002 atthe time of itsfirst renewal. New participants mayalso be accepted at other times under certaincircumstances.
How the GAB and NAB are used
NAB Participants and Credit Amounts
AmountParticipant (SDR million)Australia 801Austria 408Banco Central de Chile 340Belgium 957Canada 1,381Denmark 367Deutsche Bundesbank 3,519Finland 340France 2,549Hong Kong Monetary Authority 340Italy 1,753Japan 3,519Korea 340Kuwait 341Luxembourg 340Malaysia 340Netherlands 1,302Norway 379Saudi Arabia 1,761Singapore 340Spain 665Sveriges Riksbank 850Swiss National Bank 1,540Thailand 340United Kingdom 2,549United States 6,640
Total may not equal sum of components due torounding
GAB Participants and Credit Amounts
Original GAB(1962 -1983)Enlarged GAB(1983 – 2008)ParticipantAmount(SDR million
)Amount(SDR million)Belgium 143 595Canada 165 893Deutsche Bundesbank 1,476 2,380France 395 1,700Italy 235 1,105Japan
1,161 2,125Netherlands 244 850Sveriges Riksbank 79 383Swiss National Bank 1,020United Kingdom 565 1,700United States 1,883 4,250
Total6,344 17,000
Saudi Arabia (associated credit arrangement)1,500
SDR equivalent as at October 30, 1982
250,000 million yen entered into effect on November 23, 1976Note: Total may not equal sum of components due to rounding.

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