Listen to this article
The promise to treble resources at the International Monetary Fund was one of the feelgood moments of the Group of 20 meeting. The group was so proud of the announcement that it ranked above “restoring growth and jobs” and “strengthening our global financial institutions” in its final communiqué. Indeed, highlighting help for the IMF was obvious. It needs the funds and politicians could show they also care more about impoverished nations than bailing out rich bankers.
So what has the G20 promised? Not quite as much as the headlines suggest. Of the $500bn in commitments, only about half of that is available immediately. This comes in the form of bilateral borrowing arrangements with individual countries such as the $100bn facility agreed with Japan in February. Europe is committing a similar sum, although China’s $40bn suggests it has not yet received all it wants in terms of increased representation. The $100bn from the US is part of a different facility that will take longer to sort out.
That means other IMF members still have to stump up about $145bn to meet the G20 promise. That may be tough for the likes of Russia, Brazil and South Korea as they struggle with their own economic crises, but hopefully China will dig deeper, as might oil-rich nations such as Saudi Arabia. They had better hurry. Deutsche Bank estimates that the IMF’s coffers will be down to $50bn if loans already in the pipeline are approved. And a dozen or so countries will potentially want access to more than $250bn from the IMF’s flexible credit line, a new facility available for relatively well-managed economies suffering short-term problems.
Luckily, the IMF has also been granted $550bn in extra firepower in the form of a ninefold increase in special drawing rights for members – the IMF in effect printing its own funny money. For now, at least, squabbling over who to give it all to is the IMF’s main headache.
The Lex column is now on Twitter. To receive our daily line-up and links to Lex notes via Twitter, click here
Lex is the FT’s agenda-setting column, giving an authoritative view on corporate and financial matters. It is also one of the few parts of FT.com available only to Premium subscribers. This article is provided for free as an example. A Premium subscription gives you unlimited access to all FT content, including all Lex articles and the FT mobile Newsreader.
If you have questions or comments, please e-mail email@example.com or call:
US and Canada: +1 800 628 8088
Asia: +852 2905 5555
UK, Europe and rest of the world: +44 (0)20 7775 6248
Get alerts on Global Economy when a new story is published