The UK is offering just under £10bn ($15bn) in loans to the International Monetary Fund (IMF) to help economies in trouble. This is all part of the global efforst to bolster the fund’s lending capacity, which IMF managing director Christine Lagarde wanted to increase by $400bn. So far, other countries such as Australia will contribute $7bn, Singapore $4bn and the Republic of Korea $15bn.
There have already been commitments of of $320bn.
The eurozone as a whole is contributing $200bn of the total and Japan is another major supplier of funds and is lending $60bn. Finance ministers from the G20 group of leading economies discussed boosting the IMF’s resources at a meeting in Washington. Mr. Osborne has stressed that the loan was part of global efforts. He can lend up to £10bn without parliamentary approval.
Parliament has previously approved £40bn of loans, of which only £30bn has been committed.
“At a time when people are groaning from the problems of the Budget, to prop up a doomed currency is utter madness,” backbencher Peter Bone said before the announcement. The UK Independence Party leader, Nigel Farage, said: “[Mr] Osborne must tell the IMF that he will not donate one more penny piece to the failed euro bailouts.” BBC
All UK loans to the IMF are financed from the UK’s Official Reserves, remain UK assets and do not contribute to public sector net debt. Now Brazil wants more say in running the IMF in return for a commitment of extra money, while the US is not likely to offer any money because doing so would attract criticism at home in a presidential election year.
Russia will offer $10bn. When a country commits this money, it doesn’t necessarily mean it needs to be loaned. The IMF is hoping that if private investors think that countries in trouble can be rescued if necessary, they will be more willing to lend to them and any funding problems will not escalate.
In a speech made in January, Mr Osborne said: “IMF resources to support individual countries cannot be a substitute for further credible steps by the eurozone to support their currency.” BBC