International Monetary Fund
Pretoria – South Africa has committed to invest $2 billion of its reserves to the International Monetary Fund’s firewall fund, the Presidency said on Tuesday.
“Along with fellow members of the G20, South Africa announced in Los Cabos today that it is committed to supporting the IMF’s firewall fund, and will be investing $2 billion of its reserves towards this effort. The funds used for this purpose would be considered part of South Africa’s foreign reserves.”
This as the crisis centred in Europe persists and is affecting the rest of world, with global growth having slowed and unemployment rising.
At the G20 Summit in Cannes in November 2011, leaders agreed to increase the resources of the IMF so it can serve as a backstop in the event of further deterioration in the Eurozone situation.
The money will be drawn down only if it is needed.
“They [funds] will be drawn down only if they are needed and only after other resources have been depleted. The funds will be invested and earn interest, and would only be drawn down in emergency circumstances. If the funds are drawn down, they will ultimately be repaid and they will continue to earn interest over this period,” said the Presidency.
The resources could be used by all members of the IMF to stave off the risk of another financial crisis, which would likely lead to a sharp global slowdown and rising unemployment.
In April 2012, G20 countries and a significant number of other IMF members confirmed their participation in this effort. Commitments to increase IMF resources exceed $430 billion. The funds will be available for the whole IMF membership and will not be earmarked for any particular region.
The resources would be channelled through temporary bilateral loans and note purchase agreements to the IMF’s General Resources Account.
“South Africa’s participation in this resourcing exercise anticipates that all the quota and voice reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares,” noted the Presidency.
Previous meetings had also called for the speedy implementation of the IMF’s 2010 quota reform plan, which would not only shift more quotas to the emerging economies, but also enhance their representation inside the IMF.
South Africa is the only African country participating in the meeting of the 20 most powerful leaders and will seek to remind the world about the continent’s development agenda. Its participation among others is informed by the goal of achieving a better Africa and contributing to a better and just world.
China and New Zealand were among other countries at the summit – which concludes today – who also announced their contributions to the IMF.
President Jacob Zuma, who is attending the summit together with Finance Minister Pravin Gordhan, has previously said that the continuing vulnerability of several larger European economies presents serious negative implications for the global economy and has urged Europe to work together to resolve the debt problems which have created volatility and uncertainty in the world economy.
South Africa will be urging G20 members to put the interest of the global economy ahead of short-term national interests, and that the crisis in the Eurozone must not push development issues to the bottom of the G20 agenda. – BuaNews
Presidency clarifies $2bn IMF commitment
Pretoria – The Presidency on Wednesday moved to correct misconceptions about South Africa’s $2 billion commitment to the International Monetary Fund’s firewall fund.
“This is simply a commitment to support the IMF if needed so it sits in our foreign reserves. If the IMF uses the funds, the money is lent to the IMF and not a gift.
“For all of this time, the money will be earning interest for South Africa. The capital of the loan will ultimately be repaid to South Africa. It’s like lending money to a very strong bank. This is not a risky loan,” said the Presidency in a statement.
South Africa on Tuesday announced its commitment to invest $2 billion of its reserves to the IMF. This as President Jacob Zuma attended the two-day G20 Summit in Los Cabos, Mexico. The summit concluded yesterday.
There were misconceptions that the funds were a gift to the IMF and that the money could be used for more urgent purposes. The funds, said the Presidency, were part of South Africa’s foreign reserves and this did not require additional budgetary allocation.
On the issue that the money could be used for more urgent purposes, the Presidency said the contribution to the IMF was intended to help stave off another global recession.
“There is a real risk of global crisis today. If the global economy falls sharply, there is a serious risk that we will lose more jobs. In the last global recession we lost one million jobs. Our contribution to the IMF is intended to help stave off this kind of crisis happening again.
“The funds contributed will be available for any IMF member that is in trouble – be it in Europe, Africa or anywhere else. If South Africa needs help from the IMF, it could borrow much more than the $2 billion that we have set aside for the IMF resourcing,” explained the Presidency.
Additionally, it was not only developed countries that should contribute to the IMF but countries like India (which has contributed $10 billion) and China, which has a lower per capital income than South Africa, has set aside $43 billion for the resourcing exercise.
“Like China and India, South Africa is a responsible global citizen. We are in the G20 to support global stabilisation and growth. We need to continue to do our duty,” said the Presidency.
South Africa was the only African country participating in the meeting of the 20 most powerful leaders, where it sought to remind the world about the continent’s development agenda. Its participation, among others, was informed by the goal of achieving a better Africa and contributing to a better and just world.
At the G20 Summit in Cannes in November 2011, leaders agreed to increase the resources of the IMF so it could serve as a backstop in the event of further deterioration in the Eurozone area.
Meanwhile, IMF head Christine Lagarde welcomed commitments from countries to provide emergency resources for the IMF designed to prevent the spread of crises as well as to increase the IMF’s lending capacity so as to help countries in financial difficulty.
“I am able today to applaud the pledges of 37 countries – including Mexico and 14 other G20 countries – to additional fund resources.
“President Felipe Calderon [of Mexico] was an effective and strong voice in our efforts to create a $456 billion global firewall that puts the IMF in a much better position to help its 188 member countries restore sounder economic and financial conditions worldwide,” she said at the conclusion of the summit.- BuaNews