Friday, April 24, 2009

IMF in Final Stages of Designing Its First Bond

Wall Street Journal
APRIL 24, 2009

WASHINGTON -- The International Monetary Fund is in the final stages of designing its first bond offering and is lining up Russia, China and Brazil as potential purchasers, said financial official meeting in Washington.

Brazilian Finance Minister Guido Mantega said that Brazil, China, Russia and India -- the so-called BRIC countries -- are meeting at 2:30 pm Friday, in part, to hash out a common position on the terms they want to see in such a bond. "We are waiting for the IMF to issue a bond" as a way Brazil could make a financial contribution to the IMF, he said in an interview with the Wall Street Journal.

Russian Finance Minister Alexei Kudrin had a similar response. "We'd like to buy IMF bonds," he said after a speech at the Peterson Institute for International Economics. "We're interested." China is expected to purchase $40 billion of the bonds, British Prime Minister Gordon Brown said at the G-20 summit earlier this month

The IMF has been working on a bond offering since at least January. The bond would probably be denominated in an IMF quasi-currency called special drawing rights. Russian and Chinese officials have suggested that SDRs could eventually become a replacement for the dollar; having an SDR bond could bring them a step closer to that goal. The bond would be sold to central banks only, not to individual investors.

Mr. Mantega said the IMF came to the BRIC countries with a specific proposal for an IMF bond at the G-20 summit in London. The negotiations have intensified since then, he said, and he said they could wrap up by next week.

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