Nepal to decide on PRGF programme continuation

KATHMANDU: A year after the global economy came close to a meltdown, political leaders and financial officials around the world are meeting at a series of high-profile events in Istanbul, ending with the IMF-World Bank annual meetings that starts from tomorrow.

During the annual meetings Nepal might get more Special Drawing Rights (SDRs). Nepal’s SDR at present is 71.3 million SDRs (0.022 per cent) that is expected to rise to 117 million SDRs (0.033 per cent), according to Nepal Rastra Bank (NRB).

The allocation of SDRs boosts member countries’ reserves because SDRs

can be turned into usable currencies. Once it is added to reserves, a country

can voluntarily exchange its SDRs for hard currencies like the US dollar, euro,

yen or pound sterling through voluntary trading arrangements with IMF member nations.

The allocation of SDRs also is reflected in the voting rights and subscription to the capital of the IMF. “A member country with more SDRs will have an increased role in the IMF,” according to the central bank.

Finance Minister Surendra Pandey and NRB governor Bijaya Nath Bhattarai left yesterday for Turkey to participate in the joint and separate meetings of the IMF and the World Bank. Pandey will represent Nepal at the joint meeting while Bhattarai will participate in a separate meeting of the IMF.

The meeting is also crucial as it will also clarify Nepal’s participation in IMF programmes like the Poverty Reduction and Growth Facility (PRGF) that expired on November 2, 2007. Nepal was one of the participants in the PRGF under which it received IMF assistance to reduce poverty, though its outcome is still debatable.

The IMF’s policy advisory group, the International Monetary and Financial Committee will meet on October 4, and the Development Committee will meet on October 5. These meetings are opportunities for the Ministers of Finance and Central Banks’ governors from all countries to get together to discuss global economic issues and give guidance to the IMF.

The meetings will bring together finance ministers, central bankers, leading businessmen, academics, and members of civil

society organisations from 186 countries.

On the sidelines of

the IMF and WB meeting

in Istanbul, a meeting

of South Asian Association for Regional Cooperation (SAARC) Finance, a forum of central bank governors of South Asian countries, is also scheduled to take place. Bhattarai will take part in the meeting.

The annual meetings

of IMF follow on October

6 and 7. The meetings,

preceded by the September 24-25 summit of 20 advanced and emerging

market economies in Pittsburgh, will be pivotal in setting the strategy for the aftermath of the worst crisis that hit the global economy since the Great Depression of the 1930s.

Though assessing the global reaction to the crisis and what to do next will be top of their agenda, the key issues that the Istanbul meeting — which has the slogan Resolving Crisis, Building Recovery — will discuss are Rebalancing of demand, Financial system reforms, Restoring the financial system, Caution in unwinding the stimulus and Spotting risks.

The IMF helped coordinate the global response to the crisis-a response that most likely averted a far worse collapse by pressing for a coordinated stimulus. It also rapidly provided financial support, with more than $165 billion in loans committed or disbursed since the beginning of the crisis. In late August, the IMF also made available an additional $250 billion worth of new SDRs to member countries to bolster their reserves.

Together with an

additional allocation on September 9, about $110 billion of the combined

allocations will go to emerging market and

developing countries, including over $20 billion to low-income countries.

The IMF has stepped up lending and is encouraging low-income countries to expand budget deficits in response to the crisis.