Photo by IMF

JAKARTA (TheInsiderStories) – Twenty-five members of the International Monetary Fund (IMF) have reportedly committed a total of SDR243 billion (US$340 billion) in bilateral borrowed resources, at maximum terms, through end-2020. Total pledges by IMF members under 2016 bilateral borrowing agreements reach about $450 billion.

Christine Lagarde, IMF Managing Director, said these commitments will preserve the overall lending capacity of the IMF and provide confidence that the Fund will continue to address the needs of its membership.

‘I am heartened that so many countries have already made a commitment, and I would encourage others to join this important international cooperative effort,’ she said in a statement on Oct. 14.

The IMF’s bilateral agreement is a ‘third line of defense’, after loans granted through a quota system and New Arrangements to Borrow multilateral loans. They can be channeled to members as needed, to strengthen capacity in anticipation of financial sector shocks.

Among the conditions for disbursement of bilateral loans to be approved is that 85 percent of their owners are committed to this 2016 framework, whose bilateral agreement extends to 2020 at a maximum.

She explained that access to bilateral borrowing will be governed by a new framework approved by the IMF’s Executive Board in August 2016, replacing the one crafted in 2012 when, in response to the global financial crisis, the membership decided to supplement IMF resources through bilateral borrowing agreements.

There are currently 35 agreements with creditors under the 2012 Borrowing Agreements, for a total $393 billion. While they are set to expire starting Oct. 12, they have not been drawn but have played a critical role as a third line of defense, after quotas and the New Arrangements to Borrow, in providing assurance to members and markets that the IMF has adequate resources to meet potential needs.

On Saturday (14/10), member countries of the IMF welcomed the global upswing in economic activity, but warned that the recovery was not yet complete, given low inflation and lingering geopolitical risks.

‘The outlook is strengthening, with a notable pickup in investment, trade, and industrial production, together with rising confidence,’ the International Monetary and Financial Committee, the IMF’s steering body, said in a communiqué.

‘But the recovery is not yet complete, with inflation below target in most advanced economies, and potential growth remains weak in many countries,’ it went on.

The communiqué reiterated member countries’ pledge to refrain from succumbing to competitive currency devaluations.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com