[stop-imf] IMF: What we have to lend

[Robert Weissman]

Removed from this release is a table, "IMF's Financial Resources and
Liquidity Position, 2000 - November 2002." You can see the full release,
including this important table, at: http://www.imf.org/external/np/sec/pr/2=
002/pr0255.htm

Press Release No. 02/55
December 16, 2002

International Monetary Fund


IMF Announces New Measure of Its Capacity for New Lending

The International Monetary Fund (IMF) today announced a new method of
measuring its liquidity which is designed to give a clearer measure of
its capacity to make new loans. This is a further step in the IMF's
continuing effort to enhance public understanding of its finances.

The new measure, known as the one-year forward commitment capacity
(FCC), indicates how much the IMF has readily available for new lending
from its regular, or quota-based, financial resources. The FCC does not
include IMF lending on concessional terms. The FCC will replace the
traditional liquidity ratio as the primary measure of the IMF's liquidity.

As of November 29, 2002, the IMF's one-year FCC amounted to SDR 49
billion (about US$65 billion=97see Table). The FCC is defined as: the
IMF's stock of usable resources less undrawn balances under current
lending arrangements (currently, SDR 66 billion, or about US$87
billion), plus projected repayments by Fund borrowers (so-called
"repurchases") during the coming twelve months (SDR 16 billion, or about
US$21 billion), less a prudential balance intended to safeguard the
liquidity of creditors' claims and to take account of any potential
erosion of the IMF's resource base (SDR 33 billion, or about US$43
billion).

The prudential balance represents an indicative level of uncommitted
usable resources that the IMF would normally not use to make financial
commitments. It is calculated as 20 percent of the quotas of member
countries whose currencies are currently used in IMF lending and any
amounts activated under borrowing arrangements. The prudential balance
is determined by judgement, it does not constitute a rigid minimum, and
the IMF's uncommitted resources could, on a strictly temporary basis,
fall below this level.

The FCC takes fully into account current IMF lending commitments
(Lending Arrangements), including commitments under arrangements that
are considered precautionary=97it would also include commitments under
Contingent Credit Lines (CCL)=97and thus treats undrawn balances under all
financial arrangements in the same way. In assessing IMF liquidity on
the basis of the FCC, the actual resources available may be larger to
the extent that commitments are not fully disbursed.

The FCC will be published weekly (Week-at-a-Glance) and monthly
(Financial Resources & Liquidity). Although the Executive Board has
decided that the FCC will replace the traditional liquidity ratio, the
IMF will continue to publish the liquidity ratio for the time being.

  IMF's Financial Resources and Liquidity Position, 2000 - November 2002
 (In billions of SDRs unless otherwise indicated; end-of-period)
Explanatory Note Liquidity Home







  The IMF's Financial Resources and Liquidity Position:  Explanatory Note

The financial resources covered in this note are a pool of currencies
and other assets in the General Resources Account (GRA) that are built
up from members' fully paid capital subscriptions in the form of quotas.
These resources are used in the IMF's regular operations. They do not
include resources from the Trust Fund, the ESAF Trust, the PRGF Trust,
and the PRGF-HIPC Trust, which are used in the IMF's concessional lending.

I. Total resources

These comprise IMF's holdings of members' currencies, SDRs, gold, and
"other assets" (such as buildings and receivables). The IMF holds 103.4
million fine ounces of gold, valued on its balance sheet at SDR 5.9
billion on the basis of an average historical acquisition cost. As
mandated by the IMF's Articles of Agreement, gold acquired prior to 1978
is valued at SDR 35 per ounce, the "official" price used at that time in
dealings among central banks. Gold acquired since 1978 (13 million
ounces) is valued at the market price in effect at the time of
acquisition.

II. Non-usable resources

Resources that are considered non-usable to finance the IMF's ongoing
operations and transactions. They comprise (i) its gold holdings, (ii)
the currencies of members that are using IMF resources and are
therefore, by definition, in a weak balance of payments or reserve
position, (iii) the currencies of other members with relatively weak
external positions, and (iv) the "other assets" noted above.

Credit outstanding represents the largest portion of non-usable
currencies. The use of IMF credit by a member increases the IMF's
non-usable resources and reduces its usable resources by equivalent
amounts.

III. Usable resources

These consist of (i) holdings of the currencies of members considered by
the Executive Board to have a sufficiently strong balance of payments
and reserve position for their currencies to be used in the financing of
IMF transactions (see Financial Transactions), (ii) holdings of SDRs,
and (iii) unused amounts, if any, under credit lines already activated,
such as under the General Arrangements to Borrow and New Arrangements to
Borrow (GAB/NAB).

IV. Undrawn balances under arrangements

Amounts committed under arrangements but not yet disbursed. This
includes amounts committed under all arrangements (see Lending
Arrangements), including arrangements considered precautionary and
Contingent Credit Lines. The Contingent Credit Line facility is designed
differently from other IMF financial arrangements, because commitments
under this facility are agreed with countries that are not facing
balance of payments difficulties. As such, undrawn balances under
Contingent Credit Line arrangements are much less likely to be drawn
down by the relevant member country than other IMF financial
arrangements.

V. Uncommitted usable resources

Usable resources less the full amount of undrawn balances under existing
arrangements.

VI. Repurchases one-year forward

Repurchases (repayments) by member countries during the coming one-year
period. These repurchases add to the supply of the IMF's usable
resources. It is assumed that repurchases would be made on an
expectations basis for SRF and CCL, and on an obligations basis under
all other facilities (see Terms of IMF Lending).

VII. Prudential balance

The prudential balance is intended to safeguard the liquidity of
creditors' claims and take account of the potential erosion of the IMF's
resource base. The prudential balance is set at 20 percent of the quotas
of members that issue the currencies that are used in the financing of
IMF transactions and any amounts activated under borrowing arrangements.
The prudential ratio of 20 percent as decided by the IMF's Executive
Board reflects historical experience and judgments on the indicative
level of uncommitted usable resources that the IMF would normally not
use to make financial commitments. The prudential ratio also applies to
activated amounts under the General Arrangements to Borrow/New
Arrangements to Borrow (GAB/NAB), if any, since borrowing under the
IMF's standing borrowing arrangements represents a liquid claim on IMF
resources. The prudential balance does not represent a rigid minimum and
IMF resources could on a strictly temporary basis, fall below this
level.

VIII. One-year forward commitment capacity (FCC)

A measure of the resources available for new financial commitments in
the coming year. The FCC is equal to uncommitted usable resources plus
repurchases one-year forward minus the prudential balance. The FCC
accounts fully for actual IMF financing commitments, including
commitments under arrangements that are considered precautionary and
under Contingent Credit Lines, and thus treats undrawn balances under
all financial arrangements in the same way. In assessing IMF liquidity
on the basis of the FCC, the actual resources available may be larger to
the extent that commitments are not fully disbursed.

Memorandum Items

Potential GAB/NAB borrowing equals total amount of borrowing available
under GAB/NAB net of activated amounts. The total amount of borrowing
available under the IMF's two borrowing arrangements, the GAB and the
NAB, is SDR 34 billion (see Borrowing Arrangements). Activated borrowed
resources are always considered to be fully committed and should be
deducted from the total amount available under GAB/NAB.

Liquid liabilities consist of (i) reserve tranche positions, which a
member acquires when the IMF uses the member's currency to provide
credit to other members and through reserve assets paid by the member in
connection with quota payments, and (ii) the amount of any outstanding
borrowing by the IMF, e.g., under the GAB/NAB. The bulk of liquid
liabilities reflects credit extended by the IMF.

Liquidity ratio is the traditional measure of the IMF's liquidity
position. It is defined as the ratio of the IMF's net uncommitted usable
resources to its liquid liabilities (for an explanation, see IMF's
Financial Resources and Liquidity Position 2000-October 2002 or
Financial Organization & Operations).