The Bank of Israel joins the IMF arrangement to expand the Fund's resources for crisis resolution

15.04.2010
 
The Bank of Israel joins the IMF arrangement to expand the Fund's resources for crisis resolution
 
The Executive Board of the International Monetary Fund this week approved an expansion of the New Arrangements to Borrow (NAB) from $50 billion to $500 billion. The Bank of Israel pledged to make a sum of 500 million Special Drawing Rights (SDRs) available when necessary.
The NAB, which till now had 26 participants, was established in 1998 to significantly increase the resources available to the Fund. Under the arrangements participants commit resources to the Fund, in effect pledging to make loans to the Fund when needed to enable it to grant credit to members experiencing crises. The NAB has been operated only once so far, when the Fund granted 2.9 billion SDRs to Brazil in December 1998.
In April 2009 the leaders of the G-20 economies made a commitment to increase the ability of the Fund to make credit available to members at times of crisis. The current expansion of the NAB is a response to that call, and it includes the addition of thirteen new participants, as well as increases in the pledges of the existing participants. In the words of the Managing Director of the IMF, Mr. Dominique Strauss-Kahn, "The expansion… will help ensure that the Fund has access to adequate resources to help members that are vulnerable to financial crises."
The participation of the Bank of Israel to the NAB signifies Israel's commitment to contribute its share to the effort to achieve global financial stability. It should be noted that if use is made of the arrangements, the Bank of Israel's participation will effectively be a yield-bearing investment for the Bank, and does not constitute a free grant to other countries.