The IMF will implement a $250 billion general allocation of special drawing rights today as scheduled, aimed at boosting global liquidity amid the financial crisis, an IMF spokeswoman said yeste...

    The IMF will implement a $250 billion general allocation of special drawing rights today as scheduled, aimed at boosting global liquidity amid the financial crisis, an IMF spokeswoman said yesterday. Caroline Atkinson, the IMF`s director of external relations, said in her regular biweekly briefing that the amount, issued in proportion to a member country`s existing IMF quota, will "count immediately" towards official reserves.   "Members can choose either to hold them in their reserves or if they wish to sell all or part of their allocations to others in order to finance immediate hard-currency imports," she said. The allocation was originally called for in April by the G-20 20 nations, and the IMF board approved the move Aug. 7. Atkinson noted that nearly $100b of the general allocation will go to emerging markets and developing countries, of which low-income countries will receive over $18b. In addition, the IMF will execute a special, one-time allocation of $33b Sept. 9 which will "rectify the imbalance" caused by the fact newer IMF members, who joined since 1981, have not received an SDR allocation.   Mexico will get about $4b in special drawing rights from the IMF, helping increase the country's international reserves, Bloomberg reported. Mexico will receive the drawing rights tomorrow and on Sept. 9, the central bank said today in an e-mailed statement. This transfer is part of the $250b of special drawing rights the IMF is distributing to its members. The funds are part of a plan designed in the G-20 meeting in April to help boost liquidity amid an international financial crisis.   The IMF will officially implement the recently approved general allocation of special drawing rights (SDR) among its 186 members, equivalent to about $250b, on August 28, according to a statement by Director of the IMF External Relations Department Caroline Atkinson posted on the fund`s official Web site, Ukrainian News Agency reported. Ukraine, in line with its quota in the fund, will receive $1.589b on August 28 and will transfer the funds to its gold forex reserves. On September 9, the IMF is about to implement a one-time allocation of 21.5b SDRs, about $33b, of which Ukraine will receive another $456m   The IMF would give Bangladesh $735m in late August and early September to bolster its foreign exchange reserve in the wake of the global economic recession, Financial Express Bangladesh reported. The amount would be given not as a loan, but as a part of the global financial watchdog`s stepped up effort to inject liquidity in the central banks across the globe. IMF resident representative Jonathan Dunn told the FE that first chunk of the $630m would be disbursed to Bangladesh Bank (BB) on August 28 and the second chunk of $105m would come on September 9.   Briefly noted ---------------------------------------------------------------------   The global economy is recovering from a severe downturn but it is too soon for governments to begin winding down stimulus efforts, an IMF spokeswoman said yesterday, AFP reported. "The global economy is of course improving... today`s U.S. GDP numbers I think support that," IMF spokeswoman Caroline Atkinson said at a news conference. "The outlook is improving but we do feel that it is very important to stress that it is no time for complacency," she added. The U.S. government announced yesterday that the world`s largest economy stayed on a path of recovery from its deep recession, saying gross domestic product (GDP) shrank at an unrevised 1.0% annual pace in the second quarter, following a brutal 6.4% contraction in the preceding quarter. Atkinson recalled that the IMF was expecting "a rather muted recovery" worldwide after the worst recession since World War II.   G-20 policymakers meeting in London next week will likely pledge to maintain accommodative policies for as long as is needed, a G-7 source told Reuters yesterday, Reuters reported. The source, who did not want to be identified, said language contained in the G-20 leaders` communiqué in April on economic stimulus was not likely to change in any substantive way when finance ministers and central bankers make a new statement on Sept 5. In April, the G20 said: "Central banks have pledged to maintain expansionary policies for as long as needed and to use the full range of monetary policy instruments including unconventional instruments, consistent with price stability."   See also:   Data revisions underscored the likelihood of strong third quarter growth in the U.S. yesterday, as a hawkish Federal Reserve official raised the possibility of cutting short its planned purchases of mortgage-related securities. Jeffrey Lacker, president of the Richmond Fed, said: "I will be evaluating carefully whether we need or want the additional stimulus that purchasing the full amount authorized under our agency mortgage-backed securities program would provide."   The banking industry continues to deteriorate, with U.S. federal regulators adding 111 lenders to their list of endangered banks in the latest quarter, even as the economy shows signs of stabilizing, the Wall Street Journal reported. Data released yesterday painted a gloomy picture of the state of banking. The government fund that protects consumer deposits fell to its lowest level since 1993. The continuing woes, which come despite trillions of dollars in government rescue financing and a rebounding stock market, raised questions about how quickly the economy can revive. The Federal Deposit Insurance Corp. said it had 416 banks on its "problem list" at the end of June, equivalent to about 5% of the nation`s banks, up from 305 at the end of March and 117 at the end of June 2008. Problem banks had a combined $299.8b of assets at the end of June, compared with $78.3b a year ago.   When the credit crisis struck last year, U.S. federal regulators pumped tens of billions of dollars into the nation`s leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Today, the biggest of those banks are even bigger, Washington Post reported. The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit. No consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.   European confidence in the economic outlook increased twice as much as economists forecast in August, adding to signs the region is emerging from the deepest recession in more than six decades, Bloomberg reported. An index of executive and consumer sentiment in the 16 nations that use the euro rose to 80.6, the highest since October, from 76 in July, the European Commission in Brussels said today. Economists had predicted a two-point increase to 78, according to the median of 29 estimates in a Bloomberg survey.   Central and eastern European equities have re-bounded strongly as worries recede over their economies and risk appetite increases among investors, FT reported. The biggest surge has been seen in Lithuania. The OMX Vilnius index has jumped 48% in local currency terms since the close on June 30. Other strong performers include the Czech Republic`s PSE index, up 32%, Estonia`s OMX Tallinn index, up 29%, Poland`s WIG index, up 27%, Hungary`s Budapest Stock Exchange, up 26%, and Latvia`s OMX Riga index, up 16%. Sweden and Austria have also been helped by the growing confidence in central and eastern Europe as their banks are heavily exposed. This compares with the S&P 500, which has risen 10%, and the FTSE 100, which is up 15%.   The IMF`s executive board approved the disbursement of $278.5m to Latvia, freeing up funding that had been held up over budget disputes, WSJ reported from Washington. The second installment from the $2.4b loan granted in December, part of a $10b international rescue package, brings total disbursements from the fund to $1.1b, the IMF said. The additional money approved yesterday had been held up for months amid discussions about steep budget cuts by Riga. While the IMF has agreed on a widening budget gap this year, the government has committed to reducing the deficit starting in 2010.   See also:   The U.K. economy shrank by 0.7% in the second quarter, marginally less than the 0.8% initially estimated, according to official figures published today, FT reported. That is much slower than the 2.4% decline seen in the first quarter of the year, although it is still a weaker performance than many economists originally expected. Compared with a year earlier, the economy contracted 5.5%, the largest year-on-year decline since records began, but also slightly less than the 5.6% decline reported in the Office of National Statistics' preliminary estimate.   As far as the Eastern Partnership initiative is concerned, Belarus is attracted by the possibility of creating a free trade zone with the EU, BELTA reported. President of Belarus Alexander Lukashenko made the statement in an interview with the TV program Formula of Power. It is a joint project run by the Russian news agency ITAR-TASS and the TV channel Russia, BelTA learnt from the press service of the Belarusian head of state. The International Finance Corp (IFC) hopes to start buying bad assets from Russian banks by the end of this year, a senior IFC official in Moscow told Reuters yesterday, Reuters reported. The IFC plans with a group of investors to channel between $50m and $200m via several funds to soak up toxic assets burdening the balance sheets of many Russian banks, said Greg Alton, the corporation`s senior investment officer for Central and Eastern Europe. The IFC, the investment arm of the World Bank, is moving forward with its plan despite increasing optimism from Russia`s central bank that the country may have fewer ailing lenders than previously feared.   See also:   The central bank of Denmark, an EU member but not part of the eurozone, said yesterday it would cut its key interest rate by 0.10 point to 1.35%, AFP reported. "The reduction is a consequence of purchases of foreign exchange in the market," the bank said in a statement, adding that the cut was effective as of today.   The Jamaican Government faces an extremely tight schedule over the next few weeks as it races to put the final touches on both the first supplementary estimates and the medium term economic program, Jamaica Gleaner reported. According to the prime minister and the minister of finance, the supplementary estimates should be tabled in Parliament in early September 2009. A team from the IMF is due in two weeks on September 8. Prime Minister Golding has said the drafted letter of intent would be submitted to the fund a week thereafter and that a decision on the $1.2b stand-by facility would be conveyed, he expects, by October.   Japan's unemployment rate rose to a record 5.7% in July and deflation worsened, dealing a blow to Prime Minister Taro Aso on the eve of an election that polls indicate his ruling Liberal Democratic Party will lose, Bloomberg reported. The jobless rate rose more than economists estimated, surpassing the previous record 5.5% last seen in April 2003, the statistics bureau said today in Tokyo. Consumer prices dropped an unprecedented 2.2% from a year earlier.   The cost of protecting against Pakistan defaulting on its bonds fell to the lowest level in more than a year this week as the country's economic outlook improved and as international financial aid increased, Bloomberg reported. Credit-default swaps on the debt of South Asia's second-largest economy fell to 825 basis points today from as much as 5,106 basis points on Oct. 27, according to Royal Bank of Scotland Group Plc and CMA DataVision.   South African President Jacob Zuma was set to meet with his Zimbabwean counterpart Robert Mugabe today, saying he believed compromise would be found on disputes rattling Harare`s unity government, AFP reported. Zuma arrived in Harare last night on his first presidential visit to the neighboring country. After a state dinner at Mugabe`s official residence, he met late into the night with Zimbabwe`s Prime Minister Morgan Tsvangirai. The two had met earlier in August in Johannesburg, where Tsvangirai told Zuma that his supporters suffered ongoing harassment from police. Tsvangirai and Mugabe also remain deadlocked over key appointments, including the head of the central bank and the attorney general. "The remaining issues are not insurmountable and can be overcome," Zuma said at the dinner.   Op-eds/Letters/Editorials ---------------------------------------------------------------------   Till debt does its part Paul Krugman wrote in The New York Times today: "So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that`s a terrifying number, requiring drastic action -- in particular, of course, canceling efforts to boost the economy and calling off health care reform. The truth is more complicated and less frightening. Right now deficits are actually helping the economy. (...) The longer-term outlook is worrying, but it`s not catastrophic. The only real reason for concern is political. The U.S. can deal with its debts if politicians of both parties are, in the end, willing to show at least a bit of maturity. Need I say more?   "Let`s start with the effects of this year`s deficit. There are two main reasons for the surge in red ink. First, the recession has led both to a sharp drop in tax receipts and to increased spending on unemployment insurance and other safety-net programs. Second, there have been large outlays on financial rescues. (...) In fact, we would be better off if governments were willing to run even larger deficits over the next year or two. (...) "As I`ve said, those 10-year projections aren`t as bad as you may have heard. Over the really long term, however, the U.S. government will have big problems unless it makes some major changes. In particular, it has to rein in the growth of Medicare and Medicaid spending. (...) So don`t fret about this year`s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable. If we face a potential problem, it`s not because the economy can`t handle the extra debt. Instead, it`s the politics, stupid."   Necessity knows no law Néstor Scibona commented yesterday in La Naciَ‎n (Argentina): "Amado Boudou [Argentina's finance minister] advanced a truly strange argument [Wednesday] in officially confirming the government's intention to seek a 'mature relationship' with the IMF. 'We are doing it because we scarcely need them and this frees us from accepting conditionalities,' he told the elegant Chilean, Nicolل‎s Eyzaguirre, who now holds the position held by Anoop Singh of India when the two parties were at loggerheads.   "Argentina had no need of IMF assistance in 2007, nor in 2008, and it virtually cut off institutional and financial relations with the institution. What has changed now to justify the government's about-face after several years of demonizing the Fund? The response must be framed in terms more pragmatic than ideological. In 2009, after six years, Kirchnerism had depleted the primary fiscal surplus that was held up as one of the pillars of the 'model,' as a result of spending increasing three times faster than tax revenue. Current domestic financing (...) would keep the specter of default at bay this year and probably in 2010. But Boudou knows that without refinancing or placing debt on the free market it will be much more difficult to manage the economy as the Kirchners would like. The key to the problem remains in the hands of the Fund, since no one trusts Argentina after the default in 2001 and the forced debt swap of 2005. And far less in light of the subsequent unpredictab    ility of its economic policy.   "The minister hinted that access to the international credit market would be one way of financing long-term infrastructure projects. In other words, it would reduce the necessity of generating surpluses, something he is currently in no position to do, with provinces in the red and after confiscating private retirement savings. In light of this theoretical plan, yesterday's announcement was just the first step in the process of getting the IMF to take another look at Argentina's figures under the famous Article IV. However, satisfying the formal requirements will not be easy. (...) Financial assistance from the Fund is the end of the road, but it begins with rectifying the situation with the holdouts and refinancing Argentina's Paris Club debt, while efforts are made to correct the internal damage. The minimum hypothesis is to renew the institutional relationship. The maximum would be to obtain from the market half of what was paid in cash to the IMF in 2006, when Néstor Kirch  ner thought that the economic boom would last forever." See in La Naciَ‎n:   For a New Global Governance Bertrand Delanoë, mayor of Paris, commented in Le Monde: "The world has lost its bearings. While there was once a collectivist model, we all know where this took those who experienced it-willingly or under duress. As for the capitalist model, the crisis proved it to be unbearably adrift, destabilizing the global economy and, especially, jeopardizing its people. Given the absence of values and reference points, the vacuum is taking the day. Or if not, religious fanaticism. Or the nihilistic alliance between economic capitalism and political dictatorship. (...) The issue is this: to redefine a framework, rules, and instruments that lay out a future for this nascent 21st century, one that is reality-based and involves all stakeholders. (...) In this regard, France most assuredly has a message to put forward, drawing upon its most profound values, beginning with an unwavering attachment to the universality of human rights. (...)   "For although the regulation that the world needs is first and foremost political, this imperative must go hand in hand with an ethical requirement. (...) What might serve as the instrument of this global political regulation, devoted to a world that is more attentive to the weak, better organized against perils, and more likely to distribute wealth equitably? The UN, which has but 88 democracies among the 195 states in its General Assembly, must be reformed in a manner consistent with its historical mission, a humanistic ambition to promote the peace, security, and progress of all peoples. But with such a prospect remaining hypothetical, the democracies as a whole have an eminent role to play. This is surely the case of the EU (...) The prerequisite is that it learn how to speak with a single voice, which means building the political Europe, with common diplomacy and a minister of foreign affairs for the Union.   "This will obviously entail transfers of sovereignty. The first stage should be common representation of the EU in the IMF, just as there is a common negotiator with the WTO. For such political regulation is the key that alone will make it possible to take other decisive steps forward, in particular the economic and social regulation of our planet. (...) Strengthening the role of the IMF and the World Bank is a step in this direction, even though it is insufficient by itself. How can it be claimed, for example, that we have the Millennium Development Goals in mind in the areas of development, health, or education, in the absence of effective mechanisms? How can a challenge as complex as global immigration be addressed without a high degree of national, if not continental, policies? (...) The future of the world depends more than ever on a fundamental virtue: solidarity. (...) That is the path of values, accountability, and efficiency in addressing the true challenges of the era. This could be the voice of France, if the country can regain the capacity to speak the language that the world has come to love to hear her speak."   See in Le Monde:   Financial Markets