22.01.2025
Eesti Pank extended its credit line agreement with the IMF
Postitatud:
20.12.2024
Eesti Pank and the International Monetary Fund (IMF) have extended the bilateral loan agreement signed in 2020 under which Eesti Pank is ready to lend up to 164 million euros to the IMF if needed. The agreement was initially supposed to last until the end of 2024, but it was extended because the IMF review of its quotas, which will substantially increase its funding, has not yet come into force. This means that the Fund needs to extend its loan agreements for now so that it can maintain its financial capacity.
The IMF has similarly extended its loan agreements with the other IMF member states that signed the agreements in 2020. Bilateral loan agreements are the third line of defence for the IMF that it can use to lend to countries in difficulty, but only if the resources in the first two defence lines have been exhausted. The IMF has never yet needed to use its bilateral loans.
“It is in the interests of Estonia as a small country with an open economy that the IMF has sufficient financial capacity to hold off any possible crises and to support countries facing economic difficulties if this is needed. As a country that is dependent on exports, we could be directly affected by developments in the global economy, and for that reason it is right for the central bank to have this agreement with the Fund”, said Deputy Governor of Eesti Pank Ülo Kaasik.
The bilateral loan agreement remains the liquid foreign reserve asset of Eesti Pank, and the central bank has the right to recall it if needed after it has been activated. If the loan agreement is activated, the income for Eesti Pank from the loan to the IMF would depend on the difference between the interest rates on the basket of currencies that make up the special drawing rights (SDR) of the IMF, and the rates on the monetary policy loans of the European Central Bank.
Background
The first source of funding, or defence line, is the quota paid in by member states of the IMF, which currently stands at a total of 595.4 billion euros. When the quota review that is currently under way comes into force, that amount will be increased to 894.6 billion euros. The second line of defence is the multilateral lending agreements, which Estonia does not participate in, and which currently total 455.5 billion euros. This amount will be reduced to 378.9 billion euros when the quota review comes into force. Bilateral loan agreements between the IMF and its member states, which make up the third line of defence, will total up to 177 billion euros once the agreements have been extended, but the terms of the agreements say they will expire automatically when the quota review comes into force. If the quota review does not come into force in the coming years, the agreement between Eesti Pank and the IMF will last until the end of 2027.
Additional information:
Hanna Jürgenson
Eesti Pank
Communications Specialist
Tel: 56920 930
Press enquiries: [email protected]