Press Release: IMF Publishes Work on the State of the Global Financial Safety Net
IMF News, March 28, 2016
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- Published: March 28, 2016
Overview
- Press Release No. 16/139
- Date: March 28, 2016
- Issuer: IMF COMMUNICATIONS DEPARTMENT, Media Relations
- Contact: E-mail: media@imf.org; Phone: 202-623-7100
- The International Monetary Fund (IMF) published the paper “The Adequacy of the Global Financial Safety Net,” discussed by the IMF’s Executive Board 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),
- market-based instruments.
Key findings from the paper
- The GFSN today is much larger and more multi-layered than before, reflecting:
- the accumulation of reserves,
- the expansion of bilateral and multilateral arrangements,
- greater access to Fund resources.
- Several features of the GFSN have been enhanced over time; refinements to the IMF’s surveillance and lending frameworks have filled important gaps in the system.
- 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,
- the provision of the right incentives for countries to implement sound macroeconomic policies.
Assessment of system features and shortcomings
- The multi-layered system is diversified and flexible but has led to:
- uneven coverage across countries,
- uneven policy implementation.
- Many elements of protection are costly for borrowers:
- financial costs (e.g., reserves, commodity hedging),
- political costs (e.g., issues of stigma related to access to Fund arrangements).
- Most country groupings remain underserved by the system, lacking access to predictable and reliable funding.
Governance and next steps
- The Board’s informal meeting helped inform a discussion of the diagnosis.
- Next step: Fund staff will continue technical work on possible avenues for reforms going forward.
- Policy process context:
- The GFSN is a priority of the Group of 20.
- The GFSN 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.
IMF Press Release No. 16/139, March 28, 2016