The International Monetary Fund (IMF) has signed an agreement with the Deutsche Bundesbank under which the latter will provide loans to the equivalent of 15 billion euro (about $22 billion) to the Fund.
The agreement is part of a commitment made by the European Union in March 2009 to contribute up to €75 billion (then equal to about $100 billion) to support the IMF's lending capacity. The EU has since committed an additional €50 million (about $74 billion) to the Fund's expanded New Arrangements to Borrow.
With the signing of the agreement, the Fund can now add these resources to those already available through borrowing agreements signed with other members.
"These agreements contribute toward an increase in Fund resources that was requested in April 2009 by G-20 leaders and the International Monetary and Financial Committee in order to provide timely and effective balance of payments assistance to its members in the current crisis," an IMF release said.
The global financial crisis to likely leave long-lasting scars on the world economy, "but governments can act to stimulate a quicker revival and counter output losses," according to a new IMF study.
The study finds that banking crises typically have a long-lasting impact on the level of output, although growth eventually recovers. Lower employment, investment, and productivity all contribute to sustained output losses. While there is a strong association between the initial economic conditions and the size of the ultimate output loss, short-run macroeconomic stimulus and sustained structural reform efforts may help reduce ultimate output losses, according to the study released as part of the IMF's World Economic Outlook (WEO).
The IMF will publish its full global economic forecast on October 1 in Istanbul. But even as the global economy begins to recover from the most severe financial crisis since the Great Depression and the deepest recession since World War II, financial systems remain impaired and domestic and external imbalances persist in many economies, it said.