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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.
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