As the Asian crisis continued to unfold during 1998/99, market pressures spread, first to Russia in mid-1998 and then to Brazil toward the end of the year, heightening the demand for IMF resources. The IMF’s liquidity position weakened, and the IMF resorted to borrowing: in July 1998 under the General Arrangements to Borrow and again in December 1998 under the New Arrangements to Borrow. It repaid these borrowings in March 1999 after the quota increase under the Eleventh General Review took effect, which substantially increased the IMF’s own resources for lending. During December 1998–January 1999, the IMF’s liquidity ratio fell to less than 30 percent, about the minimum level needed to enable the IMF to meet potential requests from members. However, by the end of the financial year, the IMF’s liquidity ratio had risen to the highest level since November 1997.
IMF Liquidity Ratio
1Figure for 1999 is as of April 30.
Total purchases (drawings) in 1998/99 under arrangements and special facilities rose to SDR 21.4 billion. Net of repurchases (repayments) by members, including SDR 4.5 billion by Korea under the Supplemental Reserve Facility, IMF credit outstanding in the General Resources Account rose by SDR 11.0 billion to SDR 60.7 billion at the end of 1998/99.
The liquid resources of the IMF consist of usable currencies and SDRs held in the General Resources Account. Usable currencies, the largest component of liquid resources, are those of members whose balance of payments and reserve positions the IMF considers strong enough to warrant the use of their currencies in financing IMF operations and transactions.
The IMF’s usable resources increased sharply toward the end of the financial year as members made quota payments, under the Eleventh General Review, amounting to SDR 46.0 billion. Moreover, three additional members were included on the list of countries whose currencies are considered usable, adding SDR 1.7 billion to the IMF’s usable resources. The net effect was that, although drawings exceeded repayments by SDR 11.0 billion during the year, the IMF’s usable resources increased to SDR 83.7 billion at the end of April 1999 from SDR 47.3 billion a year earlier.
The formula for assessing the adequacy of the IMF’s liquidity consists in reducing the stock of usable currencies and SDRs by the amount of resources committed under current arrangements and expected to be drawn. A further reduction is made to take account of the need to maintain adequate working balances of usable currencies. After these adjustments, the IMF’s net uncommitted resources totaled SDR 56.7 billion as of April 30, 1999, compared with SDR 22.6 billion a year earlier.
The IMF’s liquid liabilities at the end of April 1999, consisting entirely of reserve tranche positions, amounted to SDR 63.6 billion compared with 50.3 billion a year earlier. The ratio of the IMF’s net uncommitted usable resources to its liquid liabilities, called the liquidity ratio, increased to 89.2 percent at the end of April 1999 from 44.8 percent a year earlier.