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A Factsheet - September 2008

IMF Borrowing Arrangements: GAB and NAB

The GAB and NAB are credit arrangements between the IMF and a group of members and institutions to provide supplementary resources of up to SDR 34 billion (about US$53 billion) to the IMF to forestall or cope with an impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system.

The General Arrangements to Borrow

The GAB enables the IMF to borrow specified amounts of currencies from 11 industrial countries (or their central banks), under certain circumstances, at market-related rates of interest. The potential amount of credit available to the IMF under the GAB totals SDR 17 billion (about $26.7 billion), with an additional SDR 1.5 billion available under an associated arrangement with Saudi Arabia.

The GAB, established in 1962, has been renewed ten times, most recently in November 2007 for a five year period from December 2008. In response to the growing pressures on the IMF's resources caused by the emergence of the debt crisis in Latin America in 1982, a broad review was undertaken in 1983. It resulted in a substantial increase in the credit lines, from about SDR 6 billion to SDR 17 billion. Other major amendments to earlier GAB provisions permit the IMF to use it to finance lending to nonparticipants in the GAB, if the IMF faces a situation where it has inadequate resources of its own. The earlier GAB carried a rate of interest below market rates; this rate was raised at the time of the GAB enlargement and made equal to the SDR interest rate.

The New Arrangements to Borrow

Following the Mexican financial crisis in 1994, concern that substantially more resources might be needed to respond to future financial crises prompted participants in the 1995 G-7 Halifax Summit to call on the G-10 and other financially strong countries to develop financing arrangements that would double the amount available to the IMF under the GAB. The IMF's Executive Board adopted a decision establishing the NAB, with effect from November 1998.

The NAB is a set of credit arrangements between the IMF and 26 members and institutions. These arrangements have been renewed twice, most recently in November 2007 for a further period of five years from November 2008.

The NAB is the facility of first and principal recourse in the event of a need to provide supplementary resources to the IMF. The maximum amount of resources available to the IMF under the NAB and GAB is SDR 34 billion (about $53.4 billion).

Commitments from individual participants are based predominantly on relative economic strength, as measured by IMF quotas. An IMF member or institution that is not currently a participant in the NAB may be accepted as a participant at the time of a renewal of the decision, if the IMF and participants representing 80 percent of the total credit arrangements agree. Chile's participation in the NAB was approved in 2002 at the time of its first renewal. New participants may also be accepted at other times under certain circumstances.

When have the GAB and NAB been activated?

A proposal for calls on the GAB or the NAB by the IMF's Managing Director can become effective only if it is accepted by their participants, and the proposal is then approved by the IMF's Executive Board. The NAB has been activated once-to finance a Stand-by Arrangement for Brazil in December 1998, when the IMF called on funding of SDR 9.1 billion, of which SDR 2.9 billion was used. The GAB has been activated ten times. The last time was in July 1998 for an amount of SDR 6.3 billion in connection with the financing of an Extended Arrangement for Russia. Of that amount, SDR 1.4 billion was used. Both activations were terminated in March 1999, when the Fund repaid the outstanding amounts following payments of quota increases under the Eleventh General Review of Quotas and the improvement in the Fund's liquidity position.