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The Executive Board of the International Monetary Fund (IMF) today decided to allow the IMF's Contingent Credit Lines (CCL) facility to expire on its scheduled sunset date of November 30, 2003. Created in 1999 as part of the IMF's efforts to strengthen crisis prevention, the CCL offered IMF member countries with strong economic policies a precautionary line of defense against balance of payments problems that might arise from financial contagion. No member has used the CCL.
The IMF will continue to explore ways to reduce vulnerabilities and provide precautionary support for members with strong policies in dealing with external financial developments. A Public Information Notice (PIN) on today's Board discussion will be published in the near future.
At the time of its creation, the CCL was a new approach in designing a lending instrument that could complement the IMF's broader work in strengthening the international financial architecture for crisis prevention. The fact that no member chose to use the CCL, despite some general interest, reflects both technical issues connected to the design of such a contingent facility, and the ongoing strengthening of the international financial system. Many emerging market economies have reduced their vulnerability to shocks through reserve accumulation, the adoption of flexible exchange rates, and other reforms.
For its part, the IMF has strengthened its surveillance work--an essential component in crisis prevention--with a sharper focus on capital markets, banking systems (including through the Financial Sector Assessment Program), offshore financial centers, debt sustainability, and vulnerability assessments. In addition, the Reports on the Observance of Standards and Codes (ROSCs) help members identify and address institutional weaknesses and increasingly help to inform market risk assessments.
Member countries have also made significant progress in increasing the availability of timely, high-quality economic and financial data, and the IMF has improved the transparency of its own operations. Improved economic and financial information helps financial markets to better differentiate across borrowers, reducing the risk of contagion. At the same time, the IMF continues to stand ready to use its substantial capacity and flexibility to provide rapid financial support to its members when conditions so require.
IMF EXTERNAL RELATIONS DEPARTMENT