IMF devises new measure of lending capacity

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To give the public a clearer understanding of the amount of its regular financial resources that is available for new lending, the IMF on December 16 announced a new method of measuring its liquidity.

The new yardstick-known as the one-year forward commitment capacity or FCC-indicates the amount of the organization's quota-based and nonconcessional resources on hand for member country needs. As of December 13, the IMF's one-year FCC amounted to SDR 48.951 billion (about $65.668 billion).

How is this liquidity figure arrived at? The FCC reflects the IMF's stock of usable resources minus undrawn balances from current lending arrangements, plus projected repayments by IMF borrowers (the repayments that the IMF refers to as "repurchases") over the coming 12 months. A prudential balance-intended to safeguard the liquidity of creditors' claims and to take account of any potential erosion of the IMF's resource base-is also deducted to arrive at the final FCC amount.

The prudential balance represents an indicative level of uncommitted usable resources that the IMF would normally not use to make financial commitments.

This balance reflects the judgment of the IMF's Executive Board, and it is calculated as 20 percent of the quotas of member countries whose currencies are currently used for lending purposes and any amounts activated under borrowing arrangements.

The prudential...