IMF approves new arrangements to borrowing

The International Monetary Fund (IMF) announced that its executive board has formally completed the process of activation of the New Arrangements to Borrow (NAB) for a further six-month period from October 1 to the end of March 2012.
The expanded NAB became effective from March 11, 2011 and was activated on April 1 for the maximum period of six months.
The NAB is a standing set of credit lines under which 36 members or their institutions have committed to provide supplementary resources to the IMF totaling up to SDR 363.6 billion (about $571 billion). Activation requires the consent of participants representing 85 per cent of total credit arrangements eligible to vote and the approval of the IMF’s executive board.Since the April 1 activation, some SDR 27.7 billion have been committed to Fund-supported programmes for which NAB resources could be drawn, and actual drawings under the NAB amounted to SDR 6.8 billion ($11 billion).
The NAB is supplementary to quota resources, which are made up of the quota subscriptions each member pays upon joining the Fund and in the context of quota increases thereafter, broadly based on its relative size in the world economy.
The IMF is a quota-based institution, and the Fund’s Board of Governors has emphasised that each member of the Fund commits to use its best efforts to complete the steps required to make the quota increase under the 14th General Review of Quotas effective no later than the Annual Meetings in 2012.
Lower-than-expected demand over the recent past has raised the lending capacity of the Poverty Reduction and Growth Trust (PRGT) for the years 2012–14. Staff’s latest projections suggest PRGT demand in 2011 could be about SDR 1.4 billion, up from SDR 1.2 billion in 2010. Assuming the 2009 LIC financing package is completed, these projections would be consistent with lending capacity of about SDR 2.1 billion per year from 2012–14, or SDR 1.5 billion per year through 2015. Most of the targeted loan resources under the 2009 package have now been secured, but additional pledges of about SDR 1 billion in loans are still needed, according to the IMF.
Fourteen members have pledged SDR 9.8 billion in new loan resources for the PRGT, compared to the target of SDR 10.8 billion. New borrowing agreements totaling SDR 9.5 billion have been signed with thirteen lenders. Eight of these agreements provide loan resources in SDRs, and seven creditors also participate in the voluntary encashment regime.