By Alex Tarrant
Money lent by New Zealand via the International Monetary Fund (IMF) to the Greek and Portuguese governments jumped during March and April as those nations received their latest tranches of bailout funds.
And figures for May are set to show yet another increase, after the IMF and European Union (EU) approved another payment to Greece last week. The IMF and EU have warned further tranches of Greece's €130 billion bailout may be withheld until a new government is installed in the troubled South European nation.
At April 30, New Zealand had lent the equivalent of NZ$125 million through a credit line the government has with the IMF called the New Arrangements to Borrow (NAB) facility. New Zealand signed up to the facility in 2010 and began loaning the IMF funds through it from May last year.
The US$570 billion NAB credit line with 40 countries was originally set up as a backstop for the IMF's US$385 billion quota system in case member nations' quotas had been exhausted. However, political wrangling over proposed quota increases saw the IMF turn to the NAB in 2011 and 2012 to help it fund bailouts for the Greek and Portuguese governments.
We started lending via NAB
NAB funds are able to be drawn on by the IMF for packages approved during six-monthly activation windows. The latest Greek and Portuguese bailouts were the two major packages approved during these periods from April 2011 and then October 2011. (St Kitts and Nevis has also drawn down partially on a small package approved during a NAB window.)
New Zealand began lending through the NAB in May 2011, loaning the IMF the equivalent of NZ$42.6 million after the Fund agreed to a €26 billion bailout for Portugal. In September 2011, New Zealand's lending through the NAB was increased to NZ$70.2 million as another tranche was paid to Portugal, and again in December, to what is the equivalent of NZ$85 million on current exchange rates.
In March that rose to NZ$95 million as a tranche of funds was released to Greece under its newly-agreed second package, and in April to NZ$125 million as another tranche was released to Portugal.
They could ask for NZ$3 billion
New Zealand could be called upon to lend the equivalent of NZ$1.2 billion through the NAB facility if called upon in full. New Zealand's total NAB commitment is set to fall to about NZ$700 million from October this year if proposed IMF funding reforms are passed.
The NAB credit line is on top of New Zealand's NZ$1.8 billion quota with the IMF, which represents promissory notes the Fund can call upon. Generally, 25% of a nation's quota sits at the IMF as a country's 'reserve tranche position'. That position is increased as the IMF calls on quota funding. New Zealand's reserve tranche position is currently 31.5% of its quota. The quota system had been the IMF's source of funds until the NAB was introduced. New Zealand joined the IMF in 1961.
See New Zealand's position in the Fund here.
While proposed funding reforms this year will see New Zealand's NAB commitments fall, its quota is set to rise to the equivalent of NZ$2.5 billion. Following the changes, New Zealand's total IMF commitments are set to rise from about NZ$3.1 billion to NZ$3.2 billion. However, its share holding in the IMF is set to fall from 0.38% now to 0.26% as funding reforms are passed.
These reforms are prior to any further increases in funding commitments New Zealand signs up to as the IMF seeks to double its lending capacity. See: NZ watching what other small economies do before committing to expansion of IMF funds, following US$430 bln G-20 pledge.
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13 Comments
WTF???
(+1 to Andy btw.)
And also, btw, are we allowed to know just who the geniuses are who signed us up to this?
I would be extremely interested to know EXACTLY who's signatures are on the bottom of this IMF agreement.
Then perhaps we can share our displeasure with them directly.
Here's all the articles I've written on the new credit line and NZ's IMF commitments. NAB agreed to in April 2010.
http://www.interest.co.nz/category/tag/new-arrangements-borrow
Figures change slightly sometimes due to exchange rate moves, and it's been a bit of a slog trying to figure out what money goes where. For example, money loaned through the NAB can only go to packages agreed during a NAB window, so pretty easy to see it's gone to Greece and Portugal (and St Kitts and Nevis).
Money lent through general quota can go to anything.
Here's the IMF's latest financial activities:
http://www.imf.org/external/np/tre/activity/2012/051012.htm
If it's any consolation, the IMF gets preferential creditor status when it lends you money - you must pay it back before anyone else. Not too sure that front-runner Greek party would hold to that though :)
Enjoy,
Alex
And will we get any thanks for it? No.
And once the Europeans' have sorted their bullcrap out, will we get any better access for our dairy and meat products into the EU because of it? No.
And will the EU back our position on agricultural products in any further DOHA rounds? No.
So why don’t we just say NO?
This is one of the problems with hand wringing New Zealanders. They have no balls.
NZ may still chip in for IMF bailout funds
The Government says it has received no formal requests to pledge money to a new international bailout fund, but it may do so anyway. Any pledge would go towards $US400 billion of new loans from International Monetary Fund members to stave off a fresh financial crisis. Last month, the Government sent Treasury head Gabriel Makhlouf to the meetings in the United States where the bailout fund was agreed. A spokesperson for the Minister of Finance says no formal requests for funds were made to New Zealand at those meetings. But he says the Government is considering chipping in for what is an insurance policy against a further downturn in the world economy. http://www.radionz.co.nz/news/political/105064/nz-may-still-chip-in-for-imf-bailout-funds (5-may-12) I think any bail out money should go to Greece after it leaves the Euro and after it defaults, otherwise a lot of the money will go straight to "too big to fail" TBTF banks who have made bad loans to Greece
I'm not altogether shure, Alex T, that 'loaned' is the right verb for this announcement.
And it cannot be 'Lent', which is the season of abstinence and reflection, neither conspicuous by their presence in this context.
So may I suggest 'Pawed' - , verb (transitive), contraction of 'Pi55ed Against Wall, past tense of.
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