IMF maintains lending capacity at $1 trillion

The International Monetary Fund (IMF) has maintained its credit lending capacity to borrowing nations at $1 trillion.

IMF’s decision to maintain the $1 trillion lending capacity follows the support of creditors in doubling amounts involved in the IMF’s New Arrangements to Borrow (NAB) as well as a new round of bilateral borrowing agreements (BBAs).

This is also due to the increased demand for IMF resources due to the COVID-19 pandemic and ongoing heightened risks.

The IMF’s New Arrangements to Borrow (NAB), the second line of defense after quota resources, have been strengthened. In January 2020, the Executive Board approved a NAB reform that included a doubling of the size of the NAB and setting a new NAB period through 2025.

Creditors have since provided the necessary consents and this reform took effect, on January 1, 2021. Following the effectiveness of the reform, 38 NAB participants contribute an aggregate amount of SDR 361 billion ($521 billion) to the Fund’s resource envelope.

In addition, the IMF notes work has begun to maintain access to bilateral borrowing agreements (BBAs) as the third line of defense. On March 30, 2020, the Executive Board approved a framework for a new round of bilateral borrowing, to succeed agreements in place through end-2020.

“Within this framework, a new set of agreements beyond 2020 (2020 BBAs) have been introduced to replace the 2016 BBAs, which expired at end-2020. New bilateral borrowing agreements with 37 creditors for a total of SDR 128 billion (USD 185 billion) have become effective (Table 2). Agreements with a few other prospective 2020 BBA creditors are on track to become effective in the period ahead. The 2020 BBAs have an initial term of three years through end-2023 and may be extended for one further year,” said the IMF.

Source: norvanreports
Via: Snr Fuaad Dodoo

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