19 Jun 2012

NZ agrees to lend money to IMF in event of meltdown

1:50 pm on 19 June 2012

The Government has agreed to lend another $1.26 billion to the International Monetary Fund in the event of a meltdown in the world economy.

Finance Minister Bill English says the Government would have to borrow the money if it was called upon by the IMF.

But Mr English says New Zealand has a clear self-interest in supporting the IMF's efforts to prop up the world economy.

"We are one of the most indebted developed countries and we have quite a big share of our economy in exports, so we are more at the mercy of global economic forces than a lot of other countries."

Mr English says the Government is prepared to pay an insurance premium to keep the world economy afloat.

The extra pledge takes New Zealand's total potential lending to the IMF to just over $4 billion of which about $320 million has been drawn down.

Mr English says many other countries, including the UK, Australia, Japan, Singapore and the euro zone countries have already pledged more funds to the IMF and more nations are likely to make announcements about their commitments ahead of this week's G20 meeting in Mexico.

The Finance Minister says the facility will be recorded as a contingent liability in the Government's books, but it won't affect its plan to return to surplus by 2014-2015.