Nakagawa to propose IMF loans plan at G-7
Written by changthai11 on Saturday, October 11th, 2008
Nakagawa to propose IMF loans plan at G-7
The Yomiuri Shimbun
Finance Minister Shoichi Nakagawa is expected to propose in Washington a new emergency International Monetary Fund loan program to help emerging and small economies, sources said Thursday.
Nakagawa, who also is state minister in charge of financial services, is expected to propose the plan at Friday’s Group of Seven meeting of finance ministers and central bank governors taking place in Washington, the sources said.
The total size of the loans could be about 200 billion dollars, about 20 trillion yen, they said.
The proposed program is designed to assist newly emerging economies, and small- and medium-sized countries injecting public funds into their own financial institutions.
Given the current global financial turmoil, which started in the United States but has spilled into Europe and emerging economies, it is hoped the program will help steady the global financial system through international capital cooperation.
In some newly emerging economies and small and medium European countries, total assets in domestic financial institutions far exceed the national gross domestic products.
In such countries, governments might be unable to raise necessary funds to help failing financial institutions through measures such as nationalization.
One example is Iceland, which has a population of about 310,000. After the country established a system allowing the government to nationalize all banks in the country, it requested Russia provide it emergency loans. The Icelandic parliament passed into law Monday a bill that allows the government to effectively nationalize the nation’s banks.
If implemented, it is hoped the “Nakagawa plan” would ease the concerns of small countries and emerging markets and reduce tension in international financial markets, the sources said.
The use of funds to be extended through the loan program would be limited to the stabilization of the recipient nations’ financial systems, such as a capital boost for banks.
The only condition for extending the loans would be the compiling of a “financial system rehabilitation program,” the sources said. There also would in principle be no ceiling for loans under the new program as long as nations passed screening processes.
The sources said such measures would make potential recipient countries feel more relaxed about applying for loans from the IMF, they said.
The Japanese government believes the IMF could use about 200 billion dollars from about 300 billion dollars in its special drawing right accounts for loans under the new system.
