| IMF Approves Framework for Issuing Notes to Member Countries |
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| Thursday,July 02,2009 Posted: 11:24 BJT(0324 GMT) |
| From:Xinhua Article type:Reproduced |
The International Monetary Fund executive board said on Wednesday that it has approved a framework for the issuance of notes to member countries and their central banks.
"This innovative framework will further strengthen the IMF's capacity to bring rapid assistance to its members as and when it is needed," IMF Managing Director Dominique Strauss-Kahn said in a statement.
"This new financing tool and our other financing initiatives demonstrate the commitment of the Fund and its members to tackling head-on the effects of the global financial and economic crisis," he said. "At the same time, the IMF notes offer a secure investment for our members."
Under the framework, members may sign agreements to purchase IMF notes up to a limit set by the member. Several members have already expressed their interest in buying IMF paper, with China signaling its intention to invest up to 50 billion dollars, and Brazil and Russia up to 10 billion dollars each.
Issuance of notes could begin after the first note purchase agreement has been concluded with a member. The IMF would issue notes at times when loan disbursements are made to members receiving financial assistance from the IMF. Once purchased by member governments, or their central banks, the notes would be tradable within the official sector, which includes all IMF members, their central banks, and 15 multilateral institutions �� those which are designated holders of Special Drawing Rights (SDR).
The principal of the notes will be denominated in SDR, the Fund's unit of account, which is a currency basket composed of the U.S. dollar, Euro, Japanese Yen, and Pound sterling. Interest payments will be made quarterly, at the official SDR interest rate, which is a weighted average of 3-month interest rates in these currencies.
The notes have a maximum maturity of five years, which is consistent with the maximum maturity of IMF lending under Stand-By Arrangements and Flexible Credit Line arrangements. Commitments under such IMF lending arrangements have increased to more than SDR 100 billion (about 150 billion dollars) in the past year, as the Fund has responded flexibly to members' financing needs during the global crisis.
"This framework for issuing the IMF notes marks a significant step forward in our continuing drive to make sure the IMF can respond effectively to member countries' needs in these challenging and uncertain times," Strauss-Kahn said.
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