The new Short Term Liquidity Facility (SLF) announced yesterday will allow countries to borrow up to 500% of their IMF quotas - the normal limit is 100% a year. The dollar amount would vary from country to country, but, for example, the Czech Republic would have access to up to $6.1 billion, Chile to $6.4 billion and Poland to $10.2 billion.
Not all emerging economies will be able to draw on the new facility - the IMF said that it would be limited to nations "with a track record of sound policies". However, unlike other IMF loan programmes, SLF loans would be unconditional.
While there will be limits on how much individual countries can borrow, there is no overall ceiling for the SLF - save the fact that the IMF has a total of $201 billion in "loanable funds" as of August 28. The Fund will review the facility once half of this has been drawn. The loans carry the same charges as normal IMF loans and will have three-month maturities. Borrowers will be able to draw on the SLF three times in the next twelve months.
Managing director Dominique Strauss-Kahn that the last few weeks had exposed "a gap in the Fund's toolkit of financial support... most of the facilities are designed for countries that require both financing and policy adjustment. We didn't have any instrument that could be used for short-term lending to countries with a strong track record which are never the less facing pressure on their balance of payments."
Strauss-Kahn added that the IMF had also given emergency loans under a separate scheme to Hungary, Ukraine and Iceland.
Four significant emerging economies, meanwhile, will receive direct support from the US Federal Reserve. The Fed has opened new US dollar swap lines to the central banks of Singapore, South Korea, Brazil and Mexico, allowing them to borrow up to $30 billion each.
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