While the coronavirus epidemic was ravaging the globe, the IMF quietly doubled the amount of its funding. The crisis has created wonderful lending opportunities that IMF plans to realize in the next few years. Europe is said to borrow at least $100 billion due to the economic devastation of COVID 19.
On march 31st, The IMF Executive Board approved yesterday a framework for a new round of bilateral borrowing by the IMF from January 1, 2021, to succeed the current bilateral borrowing agreements (BBAs) currently in place through end-December 2020 . The framework is broadly the same as that agreed in 2016 for the current BBAs. The new BBAs will have an initial term of three years through end-2023, which is extendable by one more year through end-2024. These new agreements will help maintain the IMF’s lending capacity of US$1 trillion for the next few years, ensuring its ability to respond to members’ needs.
The BBAs are the IMF’s third line of defense after quotas and the New Arrangements to Borrow (NAB). Today’s Executive Board decision is part of a broader package on IMF resources and governance reform endorsed by the IMF membership during the 2019 Annual Meetings, and builds on the Board’s January 2020 approval of a doubling of the NAB and guidance on quota reforms.
The new BBAs and the doubling of the NAB are expected to take effect on January 1, 2021, subject to timely approvals by creditor member countries and their institutions. These are critical steps to ensure that the IMF can support its membership through the global pandemic now unfolding and beyond.
Back On January 16th, IMF doubled the borrowing arrangements. On January 16, 2020, the IMF Executive Board approved a doubling of the New Arrangements to Borrow (NAB) and proposed to the Board of Governors a resolution concluding the 15th General Review of Quotas (15 th Review) and providing guidance on the 16th General Review of Quotas (16th Review). These are important decisions toward implementing the package on IMF resources and governance reform endorsed by the IMF membership during the 2019 Annual Meetings. On October 18, 2019, the IMFC reaffirmed its commitment to a strong, quota-based, and adequately resourced IMF to preserve its role at the center of the global financial safety net and looked forward to consideration of a doubling of the New Arrangements to Borrow (NAB) and a further temporary round of bilateral borrowing beyond 2020. It also called on the Executive Board to complete its work on the 15 th Review and committed to continuing the process of IMF governance reform under the 16th Review.
“These decisions by the IMF’s Executive Board represent a milestone in implementing the package of actions on resources and governance reform that were endorsed by the membership at the Annual Meetings. They will help secure the Fund’s US$1 trillion in lending resources and its crucial role at the center of the global financial safety net,” IMF Managing Director Kristalina Georgieva said after the Executive Board’s decisions.
“This is another strong signal of the membership’s commitment to ensure that the IMF will continue to have sufficient resources to provide full confidence that it can adequately support its membership, and that governance reform will continue under the 16th General Review of Quotas,” she said.