Leaders from more than 20 major nations announced Thursday (see the Communiqué) that they would make available an additional $1 trillion through the International Monetary Fund and other institutions to help developing countries cope with the global economic crisis. CGD president Nancy Birdsall recommended such a move in mid-February.
According to the Washington Post, the announcement is part of a broad package of measures to overcome the global financial crisis.
Declaring "a new world order is emerging" that is marked by increased international cooperation, British Prime Minister Gordon Brown told a news conference that the leaders of the Group of 20 major economies agreed to steps aimed at cleaning up troubled banks, stimulating the world economy, spurring world trade and helping the world's poorest countries…
The G-20 nations are "now implementing the largest macroeconomic stimulus the world has ever seen," Brown said. "We are in the middle of an unprecedented fiscal expansion which will, by the end of next year, amount to an injection of $5 trillion into our economies." The total of $5 trillion in stimulus money includes efforts that are already underway around the world. Central banks of the member countries agreed to "maintain expansionary policies" as long as needed, he said.
"But we have also agreed today additional resources of $1 trillion that are available to the world economy through the International Monetary Fund and other institutions," Brown said. He said this includes a new Special Drawing Rights allocation of $250 billion and an agreement to triple the amount of money available to the IMF, taking it from $250 billion to $750 billion.
Those who follow our work may remember Birdsall’s mid-February CGD Note, How to Unlock the $1 Trillion that Developing Countries Urgently Need to Cope with the Crisis, in which she provides further detail about why $1T is needed, and how it could be mobilized. She wrote:
The International Monetary Fund and the multilateral development banks already have the wherewithal to put as much as $1 trillion on the table over the next 12 to 18 months. They also have the mechanisms in place to help developing countries to use those resources well. At the April summit, the G-20 heads of state should announce that number.
In a previous post I described how Birdsall’s recommendations had been picked up in a letter from UN Secretary General Ban Ki-moon to the heads of state attending the London Summit.
You can learn more about what Birdsall hoped would happen at the London Summit on issues such as trade, climate change, and global governance by reading this recent Q&A.