WASHINGTON The International Monetary Fund said on Wednesday it ended an exemption to its lending rules that had allowed it to make major loans to Greece, Ireland and Portugal in 2010 and 2011 to fight a growing euro-area sovereign debt crisis.
Efforts to remove the "systemic exemption" were required by legislation passed by the U.S. Congress in December to implement sweeping reforms at the IMF that grant more voting power to emerging market countries including China and Brazil.
The exemption was created by the IMF in 2010 to lend to countries whose ability to repay debt was in question, but where it was feared that a default would set off a systemic crisis.
"The objective of this reform is to better calibrate IMF lending decisions to members' debt vulnerabilities, while avoiding unnecessary costs for the members, their creditors, and the overall system," IMF spokesman Gerry Rice said in a statement.
Republican U.S. lawmakers, who had long opposed the shift of U.S. funds from an IMF crisis account to acquire more IMF quotas, or shares, were able to insert language in a massive federal spending bill that allowed the shift but required the Treasury to work to secure the repeal of the lending exemption.
The change was approved on Wednesday by the IMF executive board, paving the way for the quota reforms, which had been stalled since 2010, to be implemented.
Rice said the rule change and other lending reforms to be announced next week were "a central component of the IMF's work on preventing and more efficiently resolving sovereign debt crises."
(Reporting by David Lawder; Editing by James Dalgleish)
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Published Date: Jan 21, 2016 05:00 am | Updated Date: Jan 21, 2016 05:00 am