Wednesday July 1, 09:04 PM
IMF board clears plan for first bonds
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WASHINGTON (AFP) - The International Monetary Fund executive board on Monday approved plans for the institution to issue its first bonds, a move that boosts its arsenal in battling a global financial crisis.
The IMF said its board 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. At the same time, the IMF notes offer a secure investment for our members."
China has signaled its intention to invest up to 50 billion US dollars in the notes, and Brazil and Russia have pledged up to 10 billion dollars each.
The first bonds may be issued after specific agreements are concluded with any of the countries.
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.
The five-year bonds will be denominated in IMF special drawing rights, an IMF currency basket composed of the US dollar, euro, yen, and British pound.
Interest payments will be made quarterly, at the official SDR interest rate, which is a weighted average of three-month interest rates in these currencies.
It is the dollar's relative weakness that has raised market concerns that some countries are seeking to distance themselves from the greenback, the world's main reserve currency.
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