The Global Financial Safety Net—A Stocktaking

Policy Papers, October 9, 2025

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The Global Financial Safety Net—A Stocktaking

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Bibliographic details

• Published: October 9, 2025
• Series: Policy Papers
• DOI: https://doi.org/10.5089/9798229028905.007

Overview of the GFSN

• The Global Financial Safety Net (GFSN) comprises international reserves, bilateral swap arrangements, regional financing arrangements, and the International Monetary Fund.
• Purpose: offers financing when crises occur and complements countries’ own policy responses in cushioning the impact of shocks.
• Characterization: multilayered and large in size, but coverage and access are uneven across countries and regions.

Performance in major crises

• The GFSN performed reasonably well during major crises like the Global Financial Crisis and the Covid-19 pandemic, supporting financial stability and preventing broader disruptions.
• These crises did not require the GFSN to bear the full brunt because extraordinary policy actions by major economies generated significant spillovers and reduced demand for GFSN resources.

Layer-specific findings

• International reserves
  • Role: primary shock absorber.
  • Limitation: reserve adequacy is highly uneven across countries.
• Bilateral swap arrangements
  • Role: prevented disruptions of market funding in key currencies, limiting global contagion.
  • Limitations: less proven for balance of payments support, and many arrangements lack transparency.
• Regional Financing Arrangements (RFAs)
  • Role: offer an additional layer of support.
  • Limitations: rarely used (except during the euro area crisis) and unevenly distributed across regions.
• International Monetary Fund (IMF)
  • Role: central to the GFSN, offering the widest form of international risk sharing thanks to near-universal membership.
  • Function: helps prevent crises through macroeconomic surveillance.

Current challenges and risks

• Uneven access: many low-income countries and emerging economies lack sufficient access to GFSN resources.
• Evolving global context: more frequent shocks, limited policy buffers, and transformative trends could strain the GFSN.
• Predictability and transparency issues: some GFSN layers provide less predictable or transparent support (notably some swap arrangements and RFAs).

Policy recommendations / Strengthening the GFSN

• Address uneven access, including by rebuilding reserves where needed.
• Improve predictability by making access more reliable.
• Enhance crisis preparedness by incentivizing sound policies.
• Foster better coordination across GFSN layers.

International Monetary Fund. The Global Financial Safety Net—A Stocktaking. October 9, 2025.

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