Singapore on Friday (April 20) joined the ranks of the Group of 20 (G-20) countries by contributing a $4 billion (S$5 billion) loan to the International Monetary Fund (IMF) to help troubled economies.
This is part of the broader international effort to boost the IMF’s lending capacity, which managing director Christine Lagarde wants to increase by $400 billion.
The Monetary Authority of Singapore (MAS) on Friday announced that Singapore will make a bilateral loan of $4 billion to the IMF but stressed that this contribution will be by way of contingent loans to the Fund, and not directly to countries borrowing from it. “Hence, as with our permanent capital subscriptions to the IMF (or quota subscriptions), this bilateral loan will remain part of Singapore’s Official Foreign Reserves,” MAS said in a statement.
Singapore joined other countries at the G-20 spring meetings in Washington to make this commitment to the IMF.
In a separate joint statement issued, Singapore – along with Australia, the Republic of Korea and the United Kingdom – said these contributions were made “to increase the precautionary resources of the IMF” and would be done by way of contingent loans or note purchase agreements.
Besides the pledge by Singapore, Australia committed $7 billion, Republic of Korea $15 billion and the UK $15 billion, bringing the total pledged yesterday to $41 billion.
The four countries clarified that their contributions have been made to increase the capabilities of the IMF in playing its role effectively without any specific mention of whether this amount would be used for helping to bail out eurozone countries from their debt crisis.
“Should these additional resources be used, they would support well-designed IMF programmes with appropriate conditionality and risk-mitigating measures would apply.”
The IMF announced on Thursday that it was confident of raising an additional $400 billion of funds to assure markets that it was able to cope with any future needs of the eurozone crisis. It has already secured $320 billion in commitments, buoyed by Japan’s pledge of $60 billion and a total contribution of $34 billion by Poland and Switzerland.
At the meeting of G-20 finance ministers and central bankers in Washington, Ms Lagarde said she expected the IMF’s “firepower to be significantly increased” and even mentioned a commitment from Singapore without specifying any amount.
While the IMF is closer to the $400 billion target it has set for it to better cope with the crisis, the figure is down from the additional $500 billion Ms Lagarde had initially requested in January.
The IMF is yet to receive a contribution from the US, the largest contributor to the Fund, although it is unlikely to make any additional funding commitment with presidential elections only a little more than six months away.
China, another notable absentee from the list of contributors thus far, has been silent on its likely commitment although it is expected to do so at the G-20 meetings alongside its fellow BRICS – Brazil, Russia, India and South Africa.