UAE will contribute $700m to meet new IMF quota

EXTRA FUNDS: G20 members have agreed to boost the International Monetary Fund (IMF) to $1 trillion to help assist countries worst hit by the global crisis. (Getty Images)

The UAE will meet its obligations on funds to help shore up the International Monetary Fund (IMF), but will not be lending any extra cash, according to international economists.

On Thursday G20 leaders pledged to boost the IMF to $1trillion to help countries hardest hit by the global recession.

The move requires a substantial injection of cash from its 185 members - $250bn will be raised from members, including the UAE and Saudi Arabia.

Each will be asked to contribute a sum inline with their economic size, which will see the UAE put $700m to the fund.

However, a further $500bn will be generated through extra loans from the world’s largest economies, such as Japan and the US, economic commentators were quoted as saying in UAE daily The National.

The move goes against last year's expectations that Gulf states, and other big exporters with large sovereign wealth funds, would be asked to stump up any extra cash.    

Economists have suggested that the UAE has had to bow out of lending more because it is currently suffering from severe liquidity issues, with most of the UAE Central Bank’s reserves tied up with lending money in Dubai, which has been hit hard by the property slowdown.

“I don’t think the UAE is liquid,” said Brad Setser, an economist at the Council on Foreign Relations who has worked at the IMF.

“The best thing Abu Dhabi can do is, rather than try to contribute to global recovery efforts, to contribute to the UAE recovery effort,” he added.

It is still unclear whether Saudi Arabia, one of the largest contributors to the IMF in the past, will offer extra funds, although King Abdullah did attend last week’s summit in London.

China has pledged to lend the fund $40bn, adding to the $100bn each pledged by the US, the EU and Japan.

Canada has also promised to lend $10bn more and Norway another $4.5bn.

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