Loan to International Monetary Fund
20 Apr 2009
| Ministry of Finance|
of the Czech Republic
The Czech Government decided at its meeting today to provide the IMF with a loan of €1.03 billion. The Czech Ministry of Finance asked the Czech National Bank to provide this loan from its foreign exchange reserves. The Finance Ministry had consulted the CNB on this option in advance.
The global financial crisis, which has already affected the foreign exchange solvency of several nations’ central banks, is increasing the IMF’s importance in dealing with such situations. Following a debate on the fundamental reform of the IMF at the European Council meeting in the second half of March 2009, the EU Member States agreed to provide €75 billion in fast loans to boost the IMF’s financial capacity. The individual Member States’ contributions have been recalculated on the basis of new quotas. Czech Finance Minister Miroslav Kalousek commented, “Some EU Member States are requesting financial assistance from the IMF. Others will contribute to that assistance via loans to the IMF. The Czech Republic belongs to the latter group. It is one of the few countries from Central and Eastern Europe that can afford to release funds for the IMF. The Czech Republic’s contribution calculated according to the new quotas is €1.03 billion.” A direct loan from the CNB’s forex reserves is deemed the best funding option for the Czech Republic in the current situation. “We discussed this option with the CNB in advance. This loan funding mechanism is more cost effective for the Czech state than raising money in the market. In addition, a direct loan from the CNB’s reserves will not increase the national debt. Several other countries are going to provide the IMF with loans in the same way,” added Mr Kalousek.
From the balance of payments perspective, the loan will remain part of the reserves, as it does not represent a permanent increase in the IMF’s funds. Within the balance of payments, the CNB’s assets will see a change in structure and its claim on the IMF will rise. “The CNB’s forex reserves exceed the amount needed. The loan will not reduce the liquidity of the reserves. And the bilateral agreement between the CNB and the IMF additionally includes an encashment clause that will guarantee immediate repayment if necessary,” said CNB Governor Zdeněk Tůma. Under a preliminary agreement, the Finance Ministry has pledged to cover the central bank’s costs associated with the loan. “Teams of experts from the two institutions are currently working on the final version of the agreement,” added Mr Tůma.
The loan is in order with regard to the prohibition of monetary financing. Under Article 7 of Council Regulation (EC) No 3603/93, the financing of public sector obligations vis-à-vis the IMF is not regarded as a contravention of the prohibition of monetary financing. This is confirmed by the European Central Bank.
Spokesman, Czech Ministry of Finance
CNB Communications Department