Stepping up crisis lending As part of its efforts to support countries during the global economic crisis, the IMF

is beefing up its lending capacity. It has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries varying strengths and circumstances. More recently, further reforms have been approved that strengthen the IMFs capacity to prevent crises. In particular: Doubling of lending access limits for member countries and streamlining procedures to reduce perceived stigma attached to borrowing from the Fund Introducing and refining a Flexible Credit Line (FCL) for countries with robust policy frameworks and a strong track record in economic performance; and introducing a new Precautionary Credit Line (PCL) for countries that have sound economic policies and fundamentals, but are still facing vulnerabilities Modernizing conditionality to ensure that conditions linked to IMF loan disbursements are focused and adequately tailored to the varying strengths of members policies Focusing more on social spending and more concessional terms for low-income countries The IMF has committed more than $280 billion to countries hit by the crisis including Greece, Ireland, Portugal, Romania, and Ukraineand has extended credit to Mexico, Poland, and Colombia under a new flexible credit line. The IMF is also stepping up its lending to low-income countries to help prevent the crisis undermining recent economic gains and keep poverty reduction efforts on track. Strengthening the international monetary system The current International Monetary Systemthe set of internationally agreed rules, conventions, and supporting institutions that facilitate international trade and crossborder investment, and the flow of capital among countrieshas certainly delivered a lot. But it has a number of well-known weaknesses, including the lack of an automatic and orderly mechanism for resolving the buildup of real and financial imbalances; volatile capital flows and exchange rates that can have deleterious economic effects; and related to the above, the rapid, unabated accumulation of international reserves, concentrated on a narrow supply. Addressing these problems is crucial to achieving the global public good of economic and financial stability, by ensuring an orderly rebalancing of demand growth, which is essential for a sustained and strong global recovery, and reducing systemic risk. The IMFs recent review of its mandate and resultant reformsto surveillance and its lending toolkitgo some way towards addressing these concerns but further reforms are being pursued. Supporting low-income countries The IMF has upgraded its support for low-income countries, reflecting the changing nature of economic conditions in these countries and their increased vulnerabilities due to the effects of the global economic crisis. It has overhauled its lending instruments, especially to address more directly countries' needs for short-term and emergency support. The IMF support package includes:

Mobilizing additional resources, including from sales of an agreed amount of IMF gold, to boost the IMFs concessional lending capacity to up to $17 billion through 2014, including up to $8 billion in the first two years. This exceeds the call by the Group of Twenty for $6 billion in new lending over two to three years. Providing interest relief, with zero payments on outstanding IMF concessional loans through end-2011 to help low-income countries cope with the crisis. Establishing a new set of financial instruments. Collaborating with others The IMF works with other international organizations to promote growth and poverty reduction. It also interacts with think tanks, civil society, and the media on a daily basis. The IMF collaborates with the World Bank, the regional development banks, the World Trade Organization (WTO), UN agencies, and other international bodies.

The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.

source www.imf.org