Today, the U.S. Treasury Department released a fact sheet on IMF reforms and the New Arrangements to Borrow (NAB), highlighting the need for additional IMF funding as a trigger for “restoring a healthy world economy,” and alleviating the effects of the economic crisis on emerging markets and developing countries. As a result of agreements reached at the G-20 summit this past April, the IMF NAB have been increased up to $500 billion, of which the Unites States has committed up to $100 billion. President Obama now seeks Congressional approval of an increase of up to $100 billion for U.S. participation in the NAB and an increase of approximately $8 billion in the U.S. quota for the IMF to implement the April 2008 IMF quota reform package which “allows the IMF’s governance structure to keep pace with the rapid growth and increasing significance of dynamic emerging economies.” The fact sheet emphasizes that the “failure to meet member countries’ needs for IMF financing would have significant adverse economic, political and security implications,” including the following:
- Contracting economies and weakening currencies, potentially triggering corporate and financial institution insolvency and thereby negatively impacting U.S. exports and jobs; and
- Increasing economic instability and loss of confidence in vulnerable member countries, thereby increasing costs of rescues of crisis countries.
The fact sheet also notes that the U.S. commitment of up to $100 billion is “necessary to secure significant additional participation by other countries,” and that an expansion of the NAB is critical to “provide the international monetary system with the insurance policy it needs to prevent the crisis from worsening.” Finally, the fact sheet identifies various recent reforms undertaken by the IMF, including:
- Stepping up crisis lending, with lending commitments reaching $157 billion;
- Overhauling its lending framework and increasing its flexibility by providing lending products tailored to member needs, including the new Flexible Credit Line; and
- Creating a financial safety net by helping governments to focus social spending on the most vulnerable.
In addition to the fact sheet, the Treasury Department also released a letter submitted to the Congressional leadership by the Bretton Woods Committee and signed by five former secretaries of the Treasury, four former secretaries of State and other foreign economic policy and national security experts, expressing the committee’s support for the Obama administration’s request for the prompt enactment of additional funding for the International Monetary Fund (IMF), which includes the request for the IMF’s NAB.