First, there was the G20 communique:
The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy.
That word “additional” is important. But what does it mean? Liam Halligan thinks it means much less than you think:
The much-vaunted “$250bn [£169bn] in new trade finance” is a mere $4bn of extra money if you look in the communiqué annex.
Doing the maths, even the “$1,100bn stimulus package” – the figure that drove a thousand headlines – turns out to be nonsense. There is less than $100bn of new money, most of that agreed before the G20 convened.
And now Mark Landler is trying to get to the bottom of all this:
About $500 billion of the $1 trillion represents increased direct financing for the International Monetary Fund. But, by Mr. Prasad’s count, less than half of that has so far been committed by Japan, the European Union, Canada and Norway. China is expected to kick in $40 billion, which it may do by buying bonds issued by the fund.
Treasury Secretary Timothy F. Geithner has committed the United States to $100 billion. But that must be authorized by Congress, which, administration officials acknowledge, is skeptical of foreign aid and may be doubly so this time, given its heavy spending on domestic stimulus.
Even counting the United States, Mr. Prasad said that left a shortfall of $145 billion of the $500 billion in donations…
The leaders agreed to commit $250 billion in trade credit over two years, on top of $100 billion in loans from multilateral development banks, which lend to poorer countries…
But of that $250 billion, experts said, only a quarter represents fresh cash: trade financing is rolled over every six months as exporters get paid for their goods and repay the agencies that lent them the money. The agencies then lend out the same money again. There is also some double-counting between the $250 billion and the $100 billion from the development banks.
In perhaps the most novel move, the Group of 20 authorized the monetary fund to issue $250 billion in Special Drawing Rights… The I.M.F. will issue the S.D.R.’s to all 185 of its members, and they in turn can lend them out to poor countries.
Special Drawing Rights are not cash but a form of credit, against which a country can borrow. The Obama administration, which conceived the idea and sold it to the Group of 20, figures it would create between $15 billion and $20 billion in additional credit for the poorest countries.
Where does this all leave us? It’s all rather murky, but some things are more obvious than others: it seems a bit rich to take $62.5 billion in six-month trade finance, for instance, and declare that it represents $250 billion of trade credit.
On the other hand, if the IMF issues $250 billion in SDRs, how can that create only $15 billion to $20 billion in new credit for poor countries? What happens to the rest of the SDRs?
And the biggest question marks of all surround the $500 billion in extra money for the IMF. Where will that money come from? When will it arrive? And did the G20 heads of state actually commit to providing the cash or not? Does Congress have a veto over the US portion? Will it use it?
Net-net I’m inclined to believe that any hard-and-fast statement about how much new money there really is in the G20 package is almost certain to be false: the fact is that no one knows for sure, and won’t for some time yet. But I think that Halligan is overshooting on the pessimistic side, while I’m inclined to optimism here. Maybe I’m being naive, but if the G20 says that there’s $1.1 trillion of additionality, then going by Landler’s article, I’d assume that will work out to at least $400 billion in reality, and possibly more.