Global Insider: IMF and Market Funding

The International Monetary Fund has proposed that it be allowed to borrow directly from financial markets in order to raise capital for its lending programs. In an email interview, Daniel McDowell, a doctoral student at the University of Virginia and an expert in international lending practices, discussed the IMF's proposal.

WPR: Why is the IMF seeking the ability to borrow directly from financial markets?

Daniel McDowell: The IMF wants to be a fully capable international lender of last resort (ILOLR). Simply put, an ILOLR is an actor that is willing and able to provide credit during crises to solvent but illiquid institutions -- in this case, countries -- when all other lenders will not. The IMF is almost always a willing ILOLR, but it has not always been able. In the initial stages of the global financial crisis in 2008, the IMF had roughly $250 billion in total lendable resources. While this may seem like a large sum, it was nowhere near the amount needed to respond to the massive vacuum in international credit markets. As a result, major central banks -- led by the U.S. Federal Reserve and the European Central Bank (ECB) -- were forced to provide the liquidity that the IMF could not. The Fund has already begun to rectify this, and its lendable resources today are close to $700 billion. However, increasing its resources required a lengthy and intensely political quota review process. The ability for the IMF to borrow from financial markets during times of crisis would give it increased flexibility to temporarily augment its resources on short notice, bypassing the need to negotiate with member states.

Keep reading for free!

Get instant access to the rest of this article by submitting your email address below. You'll also get access to three articles of your choice each month and our free newsletter:

Or, Subscribe now to get full access.

Already a subscriber? Log in here .

What you’ll get with an All-Access subscription to World Politics Review:

A WPR subscription is like no other resource — it’s like having a personal curator and expert analyst of global affairs news. Subscribe now, and you’ll get:

  • Immediate and instant access to the full searchable library of tens of thousands of articles.
  • Daily articles with original analysis, written by leading topic experts, delivered to you every weekday.
  • Regular in-depth articles with deep dives into important issues and countries.
  • The Daily Review email, with our take on the day’s most important news, the latest WPR analysis, what’s on our radar, and more.
  • The Weekly Review email, with quick summaries of the week’s most important coverage, and what’s to come.
  • Completely ad-free reading.

And all of this is available to you when you subscribe today.