Obama Proposes $100 Billion US Loan to IMF
President Barack Obama on Monday proposed a $100 billion U.S. loan to the International Monetary Fund to boost the IMF's war chest and urged a bigger stake in the IMF for emerging powers like China and India.
In a letter sent to Democrat and Republican leaders in the U.S. Congress, Obama said the U.S. funding "does not represent a budgetary expenditure or any increase in the deficit since it effectively represents an exchange of assets."
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The letter comes days before world finance leaders gather in Washington on April 24 and 25 for meetings of the IMF and World Bank to discuss among other things IMF lending and governance reforms at the global institutions.
The $100 billion is part of pledges made by Group of 20 member countries during a summit in London on April 2 to combat the worst economic crisis since the Great Depression.
The G20 committed to triple IMF resources to a total of $750 billion by adding $500 billion on top of $250 billion in existing resources to allow the fund to respond to crises in hard hit emerging market and developing countries.
The U.S. funding will boost the IMF's so-called New Arrangements to Borrow (NAB), an emergency facility established in 1998 that allows IMF member countries to provide credit to the Fund to deal with crises that may threaten the stability of the global financial system.
Obama urged Congress to quickly pass legislation to allow the U.S. to keep its G20 promises, and emphasized it would not require budgetary outlays.
"The United States transfers dollars to the IMF under the NAB, the United States receives in exchange another monetary asset in the form of a liquid, interest-bearing claim on the IMF, which is backed by the IMF's strong financial position, including its significant holdings of gold," Obama wrote.
He said the NAB's pool of capital was "woefully inadequate" for the IMF to support emerging and developing countries in the current severe economic and financial crisis.
"The deteriorating conditions threaten to worsen the recessions in these countries and could cause currencies to collapse," Obama wrote.
"Together, these factors, particularly if they become more acute, will further lower global growth and, as we saw during the Asian financial crisis, they will cause U.S. growth, jobs, and exports to fall even more sharply," he added.
Obama said an enlargement of the NAB facility by an overall $500 billion would allow for more participation by emerging market economies, in particular China and India, in the IMF. Chinese officials have already indicated Beijing plans to contribute $40 billion to the IMF through a bond issued to its central bank by the Fund.
Meanwhile, IMF officials have said Brazil and Saudi Arabia could also contribute.
Obama said countries were looking to Washington to deliver on its G20 commitment, indicating that other governments could follow the lead of the U.S., which is the IMF's largest and most influential shareholder.
Emerging market economies have long pushed for a greater stake in the IMF and a rebalancing of voting power to reflect their rising clout in the global economy.
In a letter sent to Democrat and Republican leaders in the U.S. Congress, Obama said the U.S. funding "does not represent a budgetary expenditure or any increase in the deficit since it effectively represents an exchange of assets."
RELATED LINKS
Sterling/Dollar Is a 'Monster Pair': Analyst
Geithner: Only Healthy Banks Can Pay Back
Taking the Pulse of the US Consumer
The letter comes days before world finance leaders gather in Washington on April 24 and 25 for meetings of the IMF and World Bank to discuss among other things IMF lending and governance reforms at the global institutions.
The $100 billion is part of pledges made by Group of 20 member countries during a summit in London on April 2 to combat the worst economic crisis since the Great Depression.
The G20 committed to triple IMF resources to a total of $750 billion by adding $500 billion on top of $250 billion in existing resources to allow the fund to respond to crises in hard hit emerging market and developing countries.
The U.S. funding will boost the IMF's so-called New Arrangements to Borrow (NAB), an emergency facility established in 1998 that allows IMF member countries to provide credit to the Fund to deal with crises that may threaten the stability of the global financial system.
Obama urged Congress to quickly pass legislation to allow the U.S. to keep its G20 promises, and emphasized it would not require budgetary outlays.
"The United States transfers dollars to the IMF under the NAB, the United States receives in exchange another monetary asset in the form of a liquid, interest-bearing claim on the IMF, which is backed by the IMF's strong financial position, including its significant holdings of gold," Obama wrote.
He said the NAB's pool of capital was "woefully inadequate" for the IMF to support emerging and developing countries in the current severe economic and financial crisis.
"The deteriorating conditions threaten to worsen the recessions in these countries and could cause currencies to collapse," Obama wrote.
"Together, these factors, particularly if they become more acute, will further lower global growth and, as we saw during the Asian financial crisis, they will cause U.S. growth, jobs, and exports to fall even more sharply," he added.
Obama said an enlargement of the NAB facility by an overall $500 billion would allow for more participation by emerging market economies, in particular China and India, in the IMF. Chinese officials have already indicated Beijing plans to contribute $40 billion to the IMF through a bond issued to its central bank by the Fund.
Meanwhile, IMF officials have said Brazil and Saudi Arabia could also contribute.
Obama said countries were looking to Washington to deliver on its G20 commitment, indicating that other governments could follow the lead of the U.S., which is the IMF's largest and most influential shareholder.
Emerging market economies have long pushed for a greater stake in the IMF and a rebalancing of voting power to reflect their rising clout in the global economy.
posted by FREDRICK B. A. at
2:37 AM
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