Member log in

NZ raises IMF commitment to $4.1b on Euro-jitters

BUSINESSDESK: New Zealand is committing to lend the International Monetary Fund another $1.26 billion in the event of global economic turmoil, ahead of announcements expected from today's G20 meeting in Mexico on measures to counter the ongoing eurozone debt crisis.

The latest $US1 billion ($NZ1.26 billion) commitment is the second such additional commitment in two years, and brings New Zealand's total potential lending to the IMF to $NZ4.1 billion, although the global lending agency has so far only drawn down $320 million from New Zealand.

The last additional commitment, also of $1.26 billion, was in 2010 to support the so-called New Arrangements to Borrow deal, which was organised to stem European debt troubles.

The funds are a loan to the international community, are repayable with interest and may never be drawn on fully.

But the request for a further commitment underlines the ongoing fragility of global economic conditions because of the political and economic crisis in the 21 countries of the eurozone.

Despite Greek elections producing an apparently pro-euro result on Sunday night, interest rates continue to soar on the debt of other, much larger European economies, particularly in Spain.

Mounting fears of the need for a full "sovereign rescue" for the Spanish economy sent the country's interest rates to a euro-era high of 7.28% overnight.

Interest rates above 6% are considered unsustainably high.

While New Zealand's IMF commitment is not earmarked for any particular part of the world, Finance Minister Bill English referred to Europe in his statement announcing the additional commitment.

"It's our expectation that Europe will continue to find solutions to its problems, but the IMF has a role in underpinning global certainty," he said.

A number of G20 countries had made additional IMF commitments in April, and more are expected at the meeting of the world's 20 largest economies in Los Cabos, Mexico, this week.

The approach to New Zealand for additional commitments was made last week, Mr English said.

"The new loan facility will be recorded as a contingent liability in the government's financial statements for the year to June 30, 2012. However, it will have no impact on the government's track to surplus," he said.

As a small, open economy with high exposure to international trade and "one of the most indebted developed countries in the world", it was in New Zealand's interests to contribute to measures intended to produce a "stable, prosperous global economy".
 

More by Pattrick Smellie

Comments and questions
17

Goodness me. So, as 'one of the most highly indebted developed countries in the world', a prudent policy is to borrow yet more to lend yet more to those other countries with so much debt already they can't even pay the bills now.

It doesn't take a lot of time to sort out why the West is in so much trouble. It was bad enough when it was the German taxpayers being crushed to forcibly fund this insanity, now we are .... Thanks Bill.

Yo Mark,
I do not believe Mr English had a choice, at the moment it is but a book figure in the "contingent liabilities" column. But does give us some sort of insurance.
What else could he do when trying to operate on, and protect a fiat currency.
Do what I did Mark, spit and kick a stone. Very relieving. Cheers.

Ponzi after Ponzi.

One might have thought Mr English might have learned from the SCF/DGS fiasco of the stupidity of providing financial support debtors of questionable solvency, but no.

About time for New Zealand policy being made in New Zealand's interest rather than the big-money international organisations such as the IMF whose original dubious reason for existence has long since ceased, it having failed to maintain the bullion exchange standard system.

A true gold standard is a gold coin standard, where private debts (such as bank notes and customer balances) are payable in gold coin (should the creditor demand it), not a central bank bullion exchange standard, where central banks promise to redeem to each other in bullion until they decide not to, throwing the world into an unanchored fiat money system.

Mr Hillary

Bill English is acting responsibly as part of the international community - a minor member mind you. Our contribution is tiny compared to the other major countries but probably fair on a per capita basis.

We can't just sit at the bottom of the world and only be takers when the need arises. We have to contribute our fair share to help stop a global meltdown.

The alternative is that if the Greek and Euro situation worsens we will be in more financial strife than the current amount pledged by NZ.

I can't agree there: much better to leave far away debtors and their creditors to sort it out and learn from the problems than repeat them and ask for our own bail-out.

The masses need to wake up to the fact that governments and banks can and do go broke and to act prudently. The European approach has been to mix bank insolvency with government insolvency, and to mix government insolvency with supra-national entity insolvency, which is likely to culminate in even more disorderly pan-national defaults and crippling tax burdens and a serious depression.

acting responsibily? Any government that enacts a policy which it previously called a "hoax" - to punish it's own peolple i.e. the ETS...is surely not a responsibile operator charged with the gift of plundering $1bn of it's citizen's dwindling coffers....without their say so..to global concens not of their making....that being it's NOT about an amount "pledged" by NZ, it's about "control"...and who has it. and who doesnt...i.e. control of ones faculties and abilities to regain control of them (or not). For, $ 1bn pledged isn't "tiny"...it'll be just the start wear you'll be weeping socialism tears of woe down stream

English, after most NZ's worked hard for their saving you are steering this country down the same path as Europe - NZ has a work force (excluding Govt wallies) of some 1.2 million and you expect these people to be able to pay your run away self made debt -

what a wonderful...wonderful new-world...

I dont remember voting for this ? Why is this not in the mainstream news ? Most New Zealanders would want to know this . I dont recall it being publicised the first time it happened. Now New Zealand has been set up as a bank to loan to the IMF ? This is not our traditional place in the world ! .... yeah , I know , if we all pitch in ..... but is this our risk ? The Chinese are contributing but not the USA , will we start proping up the USA next ?

Terrific. Offer a sinking boat a rope while your own boat springs a leak.

a lest not forget the $ 90m gifted to the mysterious Global Alliance on Global Warming/Cooling...oh...n where the EMISSIONS SCAM TAX FUNDS vanish too...

One would guess if NZ didn't need to carry a $4.1 Bn debt to the IMF we wouldn't. Legal international treaties, obligations and agreements must be in play here otherwise our finance minister would keep the coin for ourselves and put the funds towards Christchurch.

Sure we have our own issues and priorities, but we also have to abide by the rules and laws we have signed up to... some over decades ago...

...and that's a prime example of why Labour and the left should never be voted back into Government. Someone always has to pay for the promises and cheques they write out. In this case it is us along with numerous other countries having to pay for Greece living beyond their own means - and Greece still expecting someone else to pay.

please explain the differences between National's version of global socialism and that of Labours?

Global treaties and agreements we are handcuffed to - like it or not...

thats a cop out to say New Zealand (or other countries) no longer have any free will wouldn't you say and the rest of it is merely surrendering of the same to single state of global misled misery.

http://cnsnews.com/blog/paul-wilson/un-official-western-nations-dont-need-more-cars-more-tv-whatever

We're being plugged into the Prison Planet. With Rio + 20 around the corner Helen is getting ready for some more Anti-Western Global Communitarianism UN Agenda 21 style.

Even the US Dems are wising up to this. When will we?

www.democratsagainstunagenda21.com