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IMF to issue bonds to raise money

30 January 2009 13:46 (UTC +04:00)

Baku. Vahab Rzayev â€“ APA-Economics. The International Monetary Fund is finalizing a $100 billion loan from Japan and is considering issuing bonds for the first time in its history, as part of an effort to double the financial resources it has to fight the deepening global recession, reports WSJ.
The IMF isnâ€™t in danger of running out of money, said deputy managing director John Lipsky, though the fund has made commitments to lend about $50 billion in recent months to Pakistan, Iceland and a clutch of Eastern European countries, and is talking to others.
But the organization has wanted for months to double its lending ability to about $500 billion from $250 billion, to bolster confidence that it could handle other borrowers amid the crisis.
But the scope of the financial crisis has stretched the financial resources of wealthy nations, giving a new impetus to an IMF bond initiative. Asking the IMFâ€™s 185 member nations to increase their lending commitments also is probably impractical given the financial troubles many nations have at home.
Issuing bonds is "an avenue that merits consideration," Mr. Lipsky said, and IMF staff are now working out technical issues.
The IMF could sell some, or perhaps most, of the prospective bonds to central banks and other government agencies, rather than to the general investing public, according to a person involved in the discussions.
The IMF may also retool a new lending program it announced just in October, when it offered to make three-month loans with easier terms to countries who the IMF judges to have sound fiscal policies.
So far no country has applied for the program, known inside the IMF as "E-Z loans." Thatâ€™s partly because the term of the loan is so short. But countries also may fear that any IMF loan signals to the market that the nation has deeper problems ahead.
The IMF said it wouldnâ€™t require those borrowers to make the often-severe changes in their policies that it has demanded for decades. But Mr. Lipsky said the IMF is looking at how to revamp the program to make it more attractive.