Korea government denied WSJ coverage on IMF plan for jeopardized emerging nations yesterday. In spite of that, Bloomberg uncovered today the plan with details.

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IMF Said to Consider Loans Up to 5 Times Quotas (Update1)

By Christopher Swann

Oct. 24 (Bloomberg) — The International Monetary Fund is considering loans of up to five times the quota contributions of member nations, in an unprecedented effort to avert an economic collapse in emerging markets.

The Washington-based lender is discussing plans to offer so-called hard currency loans of three-to-six months that wouldn’t carry usual fund demands for policy changes, two IMF officials informed of the matter said. Countries would be able to borrow up to 500 percent of their quota — the capital they agree to contribute to the IMF, the officials said.

Emerging-market central banks have been left out of agreements between the U.S. Federal Reserve and its European and Japanese counterparts to provide unlimited funds of dollars to stabilize money markets. The reverberation of the financial crisis through the global economy has driven the premiums on emerging-market government bonds to six-year highs.

“A short-term liquidity line from the IMF could really help developing countries and would put the fund right at the heart of efforts to solve the financial crisis,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York.

Separately, Iceland today secured a $2 billion IMF loan after the collapse of the island nation’s banking system paralyzed much of its foreign-exchange market.

South Korea’s IMF quota is $4.4 billion, meaning it could get up to $21.8 billion under the potential program. Mexico might qualify for $23.5 billion, with $22.6 billion for Brazil and $10 billion for Poland.

Japan May Help

The fund’s resources could be supplemented by the world’s major central banks, and Japan has indicated a willingness to participate, the officials said.

The fund is considering tight qualification criteria for the program to ensure it helps countries that face liquidity, rather than solvency, problems, on-e of the people said.

IMF Managing Director Dominique Strauss-Kahn made the proposal two days ago at a meeting of the fund’s 24-member executive board — which represents the lender’s 185 member countries, the officials said. Additional research on the plan may be available to the board as early as today, they added.

Demand for the fund’s emergency loans — which had dried up over the past five years as developing nations boomed — is now soaring. Hungary, Ukraine, Belarus, Iceland and Pakistan have all announced this month that they are seeking financial support from the IMF.

The fund has about $209 billion available to help emerging markets. Strauss-Kahn said earlier this month the IMF could raise more money if necessary by tapping agreements to borrow from industrial countries.

“The fund has the resources to be able to support the needs of our membership, Strauss-Kahn said in Washington Oct. 9 at the fund’s annual meeting. “If these resources were all used and there was a need to increase resources, we have a different way, we know a different procedure to increase the resources.”