IMF doubles borrowing limits for poorest countries
Saturday, 25 April 2009
WASHINGTON, April 24 (AFP): The International Monetary Fund(IMF) yesterday said it has doubled the borrowing limits of the poorest countries to help them weather the global economic crisis.
IMF managing director Dominique Strauss-Kahn said the action, part of a series of lending reforms, represents a "big change" in the 185-nation institution.
"The way we'll be able to help our membership has been multiplied by two," he said at a news conference ahead of the weekend meetings of the IMF and sister institution the World Bank.
The IMF executive board agreed to double the borrowing limits of the poorest countries under the IMF's Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility (ESF) arrangements.
The two lending instruments carry extremely low interest rates and are available to the world's 78 poorest countries.
The board also began discussions this week "on options for raising additional resources for concessional lending to allow the Fund to scale up its capacity to assist low-income countries (LICs) over the medium term," the IMF said in a statement. Those discussions stemmed from recent proposals discussed by the Group of 20 leaders at a London summit on April 2, it said.
The IMF nearly doubled the volume of its concessional lending to low- income countries last year and expects a "substantial increase" this year, the Washington-based fund said.
The IMF on March 24 unveiled a series of lending reforms aimed at helping member countries battle the worst economic crisis in decades.
Access limits for nonconcessional lending were doubled and a no-strings- attached credit line was launched, but the IMF said it was still working on reforms of its lending instruments for low-income countries.
"This reform represents a significant step up in the Fund's support for its low-income member countries-which is especially needed in this global crisis," Strauss-Kahn said in the statement.
"For most of this decade, low-income countries have been growing strongly, with declining inflation and reduced debt burdens," he said.
"But, over the past two years, they have been hit by a series of shocks, beginning with the escalation in food and fuel prices and now the global crisis."
Another report adds, IMF chief Dominique Strauss-Kahn yesterday said the global economic and financial crisis "is far from over" and that the recovery will come from the United States.
"Despite some red lines and green lines" in the IMF's outlook on the global economy, "our belief is that the crisis is far from over," Strauss-Kahn said at a news conference, ahead of the IMF spring meetings in Washington this weekend.
"We still believe recovery can take place in the first semester (half) of 2010," he said, a day after the IMF published its semiannual World Economic Outlook report.
In the report, the IMF forecast the global economy would contract 1.3 percent this year, before recovering to sluggish growth of 1.9 percent in 2010.
"The beginning of the recovery has to come from the United States, and will come from the United States," the IMF managing director said.
Strauss-Kahn said that "we still have long months" of crisis, pointing to the 2.8 trillion dollars in US-originated losses for banks and other financial institutions estimated in the IMF's latest Global Financial Stability Report.
While the media focused on the IMF's extended total cost of the crisis, including European- and Japanese-originated losses, at more than four trillion dollars, he said, "the most important" figure was the 2.8 billion in US- originated losses because it is "in a time series" that shows a rapid increase in bad credit.
The head of the 185-nation institution called for stepped-up efforts to cleanse the "toxic assets" from the balance sheets of financial institutions.-
"We are far from what we need," he said. "Already a lot has been done, but not enough," he said, "especially in the United States and the European Union."
He also cited Switzerland as "a big part" of the problem.
Strauss-Kahn acknowledged the political and technical difficulties of cleansing toxic assets from balance sheets.
But he said the IMF's vast experience with banking crises shows "you never recover before you complete the cleaning up of the balance sheet of the financial sector."
"The recovery in 2010 relies a lot upon the effort that still has to be made in this domain. So, I'm again asking on the eve of these meetings for more effort to be made in this direction."
The IMF estimates that the US, European and Japanese banks will have acknowledged only a third of their losses on soured assets between mid-2007 and 2010.
Strauss-Kahn welcomed the Group of 20 countries for now spending on economic stimulus an average of 2.0 percent of gross domestic product, in line with IMF recommendations.
"For 2009, I think the effort we have been asking for has been delivered."
The IMF and sister institution the World Bank will hold their annual spring meetings on Saturday and Sunday.
IMF managing director Dominique Strauss-Kahn said the action, part of a series of lending reforms, represents a "big change" in the 185-nation institution.
"The way we'll be able to help our membership has been multiplied by two," he said at a news conference ahead of the weekend meetings of the IMF and sister institution the World Bank.
The IMF executive board agreed to double the borrowing limits of the poorest countries under the IMF's Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility (ESF) arrangements.
The two lending instruments carry extremely low interest rates and are available to the world's 78 poorest countries.
The board also began discussions this week "on options for raising additional resources for concessional lending to allow the Fund to scale up its capacity to assist low-income countries (LICs) over the medium term," the IMF said in a statement. Those discussions stemmed from recent proposals discussed by the Group of 20 leaders at a London summit on April 2, it said.
The IMF nearly doubled the volume of its concessional lending to low- income countries last year and expects a "substantial increase" this year, the Washington-based fund said.
The IMF on March 24 unveiled a series of lending reforms aimed at helping member countries battle the worst economic crisis in decades.
Access limits for nonconcessional lending were doubled and a no-strings- attached credit line was launched, but the IMF said it was still working on reforms of its lending instruments for low-income countries.
"This reform represents a significant step up in the Fund's support for its low-income member countries-which is especially needed in this global crisis," Strauss-Kahn said in the statement.
"For most of this decade, low-income countries have been growing strongly, with declining inflation and reduced debt burdens," he said.
"But, over the past two years, they have been hit by a series of shocks, beginning with the escalation in food and fuel prices and now the global crisis."
Another report adds, IMF chief Dominique Strauss-Kahn yesterday said the global economic and financial crisis "is far from over" and that the recovery will come from the United States.
"Despite some red lines and green lines" in the IMF's outlook on the global economy, "our belief is that the crisis is far from over," Strauss-Kahn said at a news conference, ahead of the IMF spring meetings in Washington this weekend.
"We still believe recovery can take place in the first semester (half) of 2010," he said, a day after the IMF published its semiannual World Economic Outlook report.
In the report, the IMF forecast the global economy would contract 1.3 percent this year, before recovering to sluggish growth of 1.9 percent in 2010.
"The beginning of the recovery has to come from the United States, and will come from the United States," the IMF managing director said.
Strauss-Kahn said that "we still have long months" of crisis, pointing to the 2.8 trillion dollars in US-originated losses for banks and other financial institutions estimated in the IMF's latest Global Financial Stability Report.
While the media focused on the IMF's extended total cost of the crisis, including European- and Japanese-originated losses, at more than four trillion dollars, he said, "the most important" figure was the 2.8 billion in US- originated losses because it is "in a time series" that shows a rapid increase in bad credit.
The head of the 185-nation institution called for stepped-up efforts to cleanse the "toxic assets" from the balance sheets of financial institutions.-
"We are far from what we need," he said. "Already a lot has been done, but not enough," he said, "especially in the United States and the European Union."
He also cited Switzerland as "a big part" of the problem.
Strauss-Kahn acknowledged the political and technical difficulties of cleansing toxic assets from balance sheets.
But he said the IMF's vast experience with banking crises shows "you never recover before you complete the cleaning up of the balance sheet of the financial sector."
"The recovery in 2010 relies a lot upon the effort that still has to be made in this domain. So, I'm again asking on the eve of these meetings for more effort to be made in this direction."
The IMF estimates that the US, European and Japanese banks will have acknowledged only a third of their losses on soured assets between mid-2007 and 2010.
Strauss-Kahn welcomed the Group of 20 countries for now spending on economic stimulus an average of 2.0 percent of gross domestic product, in line with IMF recommendations.
"For 2009, I think the effort we have been asking for has been delivered."
The IMF and sister institution the World Bank will hold their annual spring meetings on Saturday and Sunday.