IMF pub­lishes work on global fi­nan­cial safety net

The Pak Banker - - COMPANIES/BOSS -

The In­ter­na­tional Mone­tary Fund (IMF) today pub­lished the pa­per "The Ad­e­quacy of the Global Fi­nan­cial Safety Net," which the IMF's Ex­ec­u­tive Board dis­cussed dur­ing an in­for­mal ses­sion as part of the Fund's on­go­ing re­view of the in­ter­na­tional mone­tary sys­tem.

The pa­per as­sesses the strengths, weak­nesses and chal­lenges of the Global Fi­nan­cial Safety Net (GFSN) -com­prised of in­ter­na­tional re­serves, cen­tral bank swap ar­range­ments, re­gional fi­nanc­ing ar­range­ments, Fund re­sources (com­ple­mented by other mul­ti­lat­eral and bi­lat­eral devel­op­ment part­ners), and mar­ket-based in­stru­ments.

The pa­per es­tab­lishes that the GFSN today is much larger and more multi-lay­ered than be­fore, re­flect­ing the ac­cu­mu­la­tion of re­serves, the ex­pan­sion of bi­lat­eral and mul­ti­lat­eral ar­range­ments, and greater ac­cess to Fund re­sources. Sev­eral fea­tures of the GFSN have also been en­hanced over time. No­tably, the re­fine­ments to the IMF's sur­veil­lance and lend­ing frame­works have filled im­por­tant gaps in the sys­tem. How­ever, the study also rec­og­nizes that there is scope for im­prov­ing the cur­rent con­fig­u­ra­tion of the safety net, to en­hance the pre­dictabil­ity, re­li­a­bil­ity and speed of in­surance and fi­nanc­ing mech­a­nisms against shocks, and pro­vide the right in­cen­tives for coun­tries to im­ple­ment sound macroe­co­nomic poli­cies.

In­deed, the multi-lay­ered sys­tem, though di­ver­si­fied and flex­i­ble, has also led to un­even cov­er­age across coun­tries and un­even pol­icy im­ple­men­ta­tion. Ad­di­tion­ally, many of the el­e­ments of pro­tec­tion are costly for bor­row­ers - ei­ther from a fi­nan­cial per­spec­tive (i.e., re­serves, com­mod­ity hedg­ing) or from a po­lit­i­cal per­spec­tive (i.e., is­sues of stigma re­lated to ac­cess to Fund ar­range­ments). More­over, most coun­try group­ings re­main un­der­served by the sys­tem, lack­ing ac­cess to pre­dictable and re­li­able fund­ing. The Board's in­for­mal meet­ing helped in­form a dis­cus­sion of the di­ag­no­sis. As a next step, Fund staff will con­tinue tech­ni­cal work on pos­si­ble av­enues for re­forms go­ing for­ward. The GFSN is also a pri­or­ity of the Group of 20 and will be dis­cussed by min­is­ters of finance and cen­tral bank gov­er­nors in the up­com­ing High-Level Sem­i­nar on In­ter­na­tional Fi­nan­cial Ar­chi­tec­ture on March 31 in Paris.

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