Looks like Gordon Brown is going to revert to an old political trick as he pulls together a deal to save the world. There has been some movement on a number of fronts. The IMF will have its funding tripled to $750bn, or more; at least $100bn of trade finance; a big increase in special drawing rights, the IMF’s own currency, or significantly in excess of $40bn. On top of that we should see some new language on fiscal stimulus, although some officials are still doubtful that it will have any more meaning.
What is the Brown trick? Add up all the measures. The prime minister has always been a fan of big, round numbers. My rough calculation is that the international finance pledges and the existing levels of fiscal stimulus ($2,000bn?) would add up to something approaching $3,000bn. That will depend on whether “significant” progress is made on the IMF funding and SDR front, which seems very likely. Cue the biggest financial stimulus the world has ever seen.
The big question is whether this is new money. Most of the trade finance will be reallocated from various countries export guarantee budget, we think. The IMF funding will depend on the mechanism used, which is still a live issue. Far too early to be cynical, but watch out for the details.
Jim Pickard
Kiran Stacey
