What Was General Agreements to Borrow (GAB)?

The term "General Agreements to Borrow" (GAB) refers to a terminated lending medium for members of the Group of Ten (G-10). The program was established in 1962, allowing the 澳洲幸运5官方开奖结果体彩网:International Monetary Fund (IMF) to borrow funds from the central banks of these advanced countries. The capital was advanced as temporary loans to countries experiencing economic distress so they could avoid 澳洲幸运5官方开奖结果体彩网:crisis situations. The GAB was phased out at the end of 2018 after member countries agreed its usefulness was "diminished and limited."

Unde𒁃rstanding the General Agreem🔯ents to Borrow (GAB)

The General Agreements to Borrow is a program that was established by the International Monetary Fund in 1962. It relied on the cooperation of the G-10, which is composed of 11 of the world's strongest 澳洲幸运5官方开奖结果体彩网:economies, including Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom, and the United States and Switzerland, which plays a minor role.

The GAB was a standing agreement that allowed the IMF to borrow money from these countries in order to assist other nations in economic distress. Countries that faced financial difficulties that threatened to stall 澳洲幸运5官方开奖结果体彩网:economic growth or harm the international monetary system, were able to turn to the IMF for supplemental 澳洲幸运5官方开奖结果体彩网:liquidity. The IMF, in turn, relied on funds offered through the GAB to help those in need of capital.

As of mid-2018, the GAB permitted the IMF to provide supplemental loans of up to $24 billion (this figure remained as such as of December 2017) to members in need. Under the IMF's arrangements, plenty more was made available to help stave off events posing a threat to the stability of the 澳洲幸运5官方开奖结果体彩网:financial system. The need for programs like GAB arose from the 澳洲幸运5官方开奖结果体彩网:balance of payments (BOP) issues that arose in the U.K. and the U.S. in the 1960s and more recently from hurdles faced by 澳洲幸运5官方开奖结果体彩网:emerging market economies, notably those in Latin America and Asia.

The GAB was only activated ten times since it was first established. Its size didn't change since 1983. Although it was routinely renewed, its participants noted that the GAB's importance declined while the IMF's executive board indicated the program's usefulness diminished over the years. Given all of this, the executive board decided not to renew the GAB in 2017, allowing it to phase out on Dec. 25, 2018.

Advantages and Disadvantages of the GAB

Proponents argued that all a small country needs from time to time is a shot of added liquidity to implement the right policies to jump-start its local economy back into 澳洲幸运5官方开奖结果体彩网:expansion. Through the GAB, the IMF helped member countries restore exports after natural catastrophes and investor confidence, when necessary. It also enabled t💧he IMF to restrict problems related to instability that might spread to other countries if left unch💎ecked.

Not everyone agrees that IMF loans have a positive impact, though. Some argue the organization empowers poor policy decisions and serves as a backstop for incompetent governmental leadership. Another criticism is that the loans wind up flowing to 澳洲幸运5官方开奖结果体彩网:financial institutions in 澳洲幸运5官方开奖结果体彩网:industrialized countries, reimbursing bankers for𒈔 their poor, risky bets in eme♛rging markets.

The conditions attached to the loans have also been questioned. The IMF, as it did with its three bailouts for Greece, demands 澳洲幸运5官方开奖结果体彩网:austerity measures that, at best, do not help citizens in struggling count⭕ries directly. Some argue that these terms pro♔long economic suffering, exacerbate poverty, and reproduce the structures of colonialism.

GAB vs. NAB

The New Arrangements to Borrow (NAB) became the primary fundraising facility for IMF loans when it was introduced in the late 1990s. It was first proposed in 1995, following the 澳洲幸运5官方开奖结果体彩网:Mexican financial crisis. There♕ were growing concerns during this period that significantly more resources would be needed in the future to adequ🦂ately respond to economic downturns.

As a result, the IMF got in contact with the G-10 and other financially strong countries about developing a new 澳洲幸运5官方开奖结果体彩网:financing arrangement that would double the amount🃏 available under🍸 the GAB. The NAB was officially launched in 1998, the same year that the GAB was last activated. From that point forward, the GAB could only be activated if access to the better-funded NAB was refused.

Like the GAB, the NAB is a set of 澳洲幸运5官方开奖结果体彩网:credit arrangements between the IMF and certain countries. What mainly sets them apart is the membership numbers. The GAB had a limited number of participants while the NAB has 38 that take part. The total amount of the NAB was set at $521 billion between 2021 and 2025.