IMF Revision Surpasses Expectations
April 2nd, 2009 at 2:46 pm - by Tom Prout
The foremost concern addressed at Thursday’s G20 summit was the role that the International Monetary Fund will play on the road to global economic recovery. British Prime Minister Gordon Brown had in recent months called for an increase of $250 billion to the previous lending capacity of the same amount, effectively doubling the reserves. World leaders, finance ministers, and central bank managers from the Group of 20 developed and developing economies today agreed to increase the fund by $500 billion, to $750 billion.
The International Monetary Fund (IMF) is in place to relieve countries of their national debt in times of financial hardship, in addition to providing loans for infrastructural purposes; earlier this week, the IMF agreed to purchase $3 billion of national debt from the Ivory Coast, following a $565 million loan issued on Friday for the purpose of tackling poverty in the country. The lending capacity, previously $250 billion, has been increased by 200% in an effort to assist countries struggling with the latest global economic downturn, and several Eastern European countries have requested such assistance already.
This additional $500 billion in funding for debt relief will come from several sources. The majority will be contributed by member nations: Japan is said to be providing $100 billion, with the European Union (EU) matching that amount — China is set to pledge $40 billion to the Fund. The current IMF voting quota, , does not reflect the level of global economic contribution by emerging economies; in conjunction with the pledging of new funds, a communique issued following the day of round table talks said that proper representation would be granted to countries such as China, which has become a major economic force in recent times.
Another $50 billion of funding for the IMF, specifically reserved for developing world aid purposes, will come from the sale of a considerable amount of gold currently held in the IMF’s reserves. Gold fell as low as $894 during intraday trading in the United States, Thursday, but rose back to $904 down from the daily high of $934.50.
Earlier opposition to financial stimulus coming from Paris seems to have been forgotten, as an exponential rise in request for IMF aid are expected to flood in.
