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<p>[QUOTE=&quot;Cloudsweeper99, post: 895319, member: 3011&quot;]The issuance of debt to cover SDRs is the same mechanism by which the Fed creates US dollars, except the IMF is creating SDRs.&nbsp; If you can&#039;t understand the numbers, maybe you can understand the words from the IMF site:</p><p><br /></p><p>&quot;<b>The IMF’s lending capacity</b></p><p>The IMF can use its quota-funded holdings of currencies of financially strong economies to finance lending. The IMF’s Executive Board selects these currencies every three months. Most are issued by industrial countries, but the list also has included currencies of lower income countries such as Botswana, China, and India. The IMF’s holdings of these currencies, together with its own SDR holdings, make up its own usable resources. <b><i>If needed, the IMF can temporarily supplement these resources by borrowing</i></b> (see below).</p><p>The amount the IMF has readily available for new (non-concessional) lending is indicated by its one-year forward commitment capacity. This is determined by its usable resources (including unused amounts under loan and note purchase agreements), plus projected loan repayments over the subsequent twelve months, less the resources that have already been committed under existing lending arrangements, less a prudential balance. </p><p><b>Borrowing arrangements</b></p><p>The IMF maintains two standing multilateral borrowing arrangements—the New Arrangements to Borrow (NAB) and the General Arrangements to Borrow (GAB)—currently with a total borrowing capacity of SDR 34 billion (about $52 billion). If the IMF believes that its forward commitment capacity might fall short of its member countries’ needs—for example, in the event of a major financial crisis—it can activate these arrangements. Their renewal was approved in 2007 for another five years starting in 2008.</p><p>In April 2009, the G-20 Leaders and the International Monetary and Financial Committee agreed to increase the resources available to the IMF through immediate financing from members by $250 billion, <i><b>and to subsequently expand the NAB by up to $500 billion and make it more flexible</b></i>.&quot;</p><p><br /></p><p><br /></p><p>Or, to put it into layman&#039;s terms, if the IMF doesn&#039;t have enough currency or other assets on hand to make loans or issue SDRs, they just issue them against borrowings like any other central bank.&nbsp; And if you could have read the numbers, you would have seen that this is exactly what began to happen in 2009.[/QUOTE]</p><p><br /></p>

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