The International Monetary Fund (IMF) has resolved to close down its own refinancing platform- General Arrangements to Borrow (GAB), worth $24 billion.
GAB enables the IMF to borrow specified amounts of currencies from 11 advanced countries or their central banks, under certain circumstances, but now may only be activated when a proposal to use NAB is rejected by participants.
The decision, which would be effective at the end of the current term- December 25, 2018, was reached by the contributors of the fund on realising that the usefulness of the initiative has not only diminished, but now limited, especially as IMF’s overall lending capacity now stands at about $1 trillion
“The GAB has also not been activated in almost 20 years and the modalities of borrowing under the GAB are less flexible than those under the NAB. Furthermore, the GAB does not add to the Fund’s total lending capacity, which remains strong.
“In light of these considerations, the GAB decision was not renewed by the IMF’s Executive Board by December 25, 2017, the deadline for its renewal,” IMF said.
Under the new arrangements called NAB, IMF and 38 member countries and institutions, including several emerging market countries, will raise funds when IMF needs to supplement its quota resources for lending purposes.
The NAB deal that was just renewed in November 2017 for another five years, came on concerns that substantially more resources might be needed to respond to future financial crises.
Meanwhile, the size of the GAB, which has remained unchanged since 1983 and fallen sharply relative to quotas, is now overtaken by New Arrangements to Borrow (NAB).