IMF Considers to Issue Bonds for a New Lending Program

The International Monetary Fund [IMF] is considering a new investment vehicle as a way to raise money to help it restore international financial stability and global growth.

From The NYT: Hoping to raise money quickly for a new $500 billion emergency loan program, the International Monetary Fund is in the advanced stages of a plan to sell bonds for the first time in its history, officials for the group said Saturday.

The bonds’ buyers are expected to be the governments of fast-growing emerging economic powers…[F]und officials said they are close to agreeing…to sell bonds to countries including China, Russia, Brazil and India. The bonds would have to be repaid after one or two years, so they would not increase the fund’s permanent resources.

But they would provide the fund with a way to raise the entire $500 billion quickly enough to help countries trapped in cash squeezes because of the frozen credit markets.

Short excerpt from The IMF’s Communiqué released today (Saturday):

We call on the IMF to continue acting promptly to make available, under adequate safeguards, substantial resources to member countries with external financing needs. Since the IMF is, and shall remain, a quota-based institution, we urge a prompt start to the fourteenth general review of quotas so that it is completed by January 2011. We have agreed to increase the resources available to the IMF through immediate financing from members of US$250 billion, subsequently incorporated into expanded and more flexible New Arrangements to Borrow (NAB), increased by up to US$500 billion, and to consider market borrowing if necessary. We welcome progress by the NAB meeting yesterday, chaired by Japan and attended by NAB current and potential participants, and ask the group to carry this work forward expeditiously. While an expanded NAB is an important backstop for Fund resources, we recognize that it is not a substitute for a quota increase. We also stress the need to ensure that the Fund has adequate financing capacity to meet the needs of low-income countries.

emphasis added

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