Last Friday the IMF announced that it had entered into a $100 billion borrowing agreement with Japan “to bolster the Fund’s lendable resources during the current global economic and financial crisis.” The Japanese government had previously announced in November its willingness to provide “supplemental funding to the IMF,” in the form of a loan. The loan is for one year, but the IMF has the discretion to extend the term of the loan up to five years “if warranted by the Fund’s liquidity situation and its actual and prospective borrowing needs.”

Presently, the IMF has around $200 billion in resources at hand to extend to countries in need (which separate from the aid it has received from Japan) and it already has committed approximately $48 billion in aid to countries affected by the crisis including Belarus, Hungary, Iceland, Latvia, Pakistan, Serbia and Ukraine. Managing Director Dominique Strauss-Kahn has indicated that he wants to increase the Fund’s reserve to around $500 million and the IMF’s Executive Board is currently “considering a number of ways to strengthen the Fund’s resources, including additional borrowing from official sources.”

Mr. Strauss-Kahn stated that “[t]his commitment is the single-largest supplemental financing contribution by an IMF member country ever, and it clearly demonstrates Japan’s continuing commitment to a multilateral approach to global economic and financial challenges.” He also noted that the IMF was “hopeful” that other member countries would “join Japan in providing their support to the Fund’s efforts.”