Malta may be small but it will still be lending the International Monetary Fund $160 million (€108.6 million) by the end of this year to enable it to help struggling economies severely hit by the global economic crisis.
Malta's decision to lend the sum through the Central Bank forms part of an EU-wide burden sharing agreement to commit $100 billion of fresh reserves to the IMF.
A government spokesman confirmed that Malta agreed to share the burden: "Malta has already committed itself to provide about $160 million, this being its estimated share in the EU's original commitment."
"This contribution is expected to take the form of a bilateral loan between the Central Bank of Malta and the IMF and will not affect the size of the CBM balance sheet."
Each IMF nation is assigned a quota based on its size in the world economy and which is used as the basis of how much member states must contribute and how big of a say they have. Malta's share is estimated to be $160 million.
Malta's contribution will change the composition of the asset side of the CBM balance sheet because payment of the funds lent by the CBM to the IMF will be offset by the acquisition of a claim on the IMF by the CBM.
The specific terms of the agreement between Malta and the IMF are still subject to negotiations, which are likely to be wrapped up by the end of the year, according to the government spokesman.
Asked whether Malta would be willing to further increase its commitment in the coming years in view of the worsening effects of the worldwide economy, the spokesman said Malta had not committed itself to make any further contributions.
As part of the international response to the financial and economic crisis, the G20 countries last April committed themselves to provide immediate bilateral financing to the tune of $250 billion to the IMF.
They also pledged to incorporate the immediate financing from members into an expanded and more flexible new-arrangements-to-borrow (Nab) facility, which will include other G20 countries, to be increased by up to $500 billion.
At the time, the EU declared its readiness to provide fast temporary support for a total of €75 billion (about $100 billion). During a meeting of EU finance ministers last July, member states expressed their readiness "to take their share of further financing needs, as they arise over the medium-term, in line with their economic weight as reflected by their quota shares in the IMF".
This was through the Nab facility, in the context of "fair burden sharing at the global level recognising the necessary link between contribution and representation".
The revised commitment of the EU corresponds to its appropriate share in the enlarged contribution ($500 billion), taking into account the EU's role in the global economy.
The IMF has repeatedly warned that its resources, and therefore its ability to lend to countries in difficulty, could shrink if the economic crisis endured.
It has already signed an agreement for Japan to borrow up to $100 billion, although other reserve rich countries have not yet followed Tokyo's example.