Money Matters, Simplified.
Britain, France pledge $2 billion each to IMF for poor countries
by Jamie Anderson - October 4, 2009 - comments
Britain Prime Minister Alistair Darling is seen with the French counterpart Christine Lagarde. The two announced that their countries would each donate 2 billion dollars in special drawing rights (SDRs) created by the IMF as loan resources to help low-income countries hit by the economic crisis.
Istanbul, October 4: France and the U.K. have pledged to loan the International Monetary Fund (IMF) $4 billion at low interest rates to assist the Washington-based lender finance poor countries hit hard by the current economic recession.
The finances would be arranged by the two countries by drawing on currency reserves given to them by the IMF earlier this year.
The announcement to fund the poor countries through the IMF came after a meeting of finance ministers and central bank governors of the Group of Seven (G7) nations in Istanbul Saturday.
"There is no room for complacency since the prospects for growth remain fragile and labor market conditions are not yet improving. We will keep in place our support measures until recovery is assured," the G7 finance officials said in a statement.
Aid is a loan, not a bequest
"The crisis is not over and its effects are particularly hard on the poorest countries,” opined French Finance Minister Christine Lagarde.
“Our respective 2 billion dollars are not a huge amount relative to the magnitude of financing that is needed but this is indicative of what we can do and others can eventually follow," added Lagarde.
The IMF had, in August, infused close to $250 billion into members’ foreign-exchange reserves with the objective to boost global liquidity.
Member countries have the option of keeping the reserves or transferring them to poorer members.
The aid from the two countries is a soft loan extended for the benefit of the poor countries to bail them out of the current economic crisis.
Britain's Alistair Darling said of the country’s gesture, "If we don't do anything, poverty will increase and it will take much longer for (poor countries) to recover from the crisis, which they had nothing to do with."
Welcome step
The loan establishes the fact that both the countries aim to "arrive at real progress" regarding development on a worldwide basis.
Chancellor of the Exchequer Alistair noted, “Many of the low income countries are at risk because of what has happened because of the economic downturn. The U.K. is ready to work with France and other countries to make sure international institutions deliver.”
Meanwhile, IMF's managing director, Dominique Strauss-Kahn has welcomed the move by U.K and France. According to him, Africa would be the top priority when it comes to extending loans.
He also urged other countries to adopt such measures, "I pay tribute to Britain and France. This is incredibly helpful for low-income countries. It's a beginning and I hope that other countries including the richest countries in the world will follow the same route."