Adequacy of the Global Financial Safety Net--Proposal for a New Policy Coordination Instrument PDF Download
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Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498346618
Category : Business & Economics
Languages : en
Pages : 20
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Book Description
The global financial safety net (GFSN) has become larger and more decentralized, creating a need for greater coordination. The expanded GFSN has created multiple sources of official financing for countries in need of support to address balance of payments shocks. Enhanced coordination among these layers would facilitate a more efficient use of global resources and provide better incentives for implementing sound policies. A new non-financing Policy Coordination Instrument (PCI) would address gaps in the GFSN and the Fund’s toolkit. The new Policy Coordination Instrument is designed for countries that are seeking to unlock financing from multiple sources and/or to demonstrate a commitment to a reform agenda. It would enable a closer policy dialogue between the Fund and countries, more regular monitoring of economic developments and policies, as well as Board endorsement of those policies. It would be available for all member countries. The key design features draw on Fund financing arrangements and the Policy Support Instrument (PSI), with some important differences. These include no qualification criteria, a review-based approach for monitoring of conditionality, and a more flexible review schedule. The PCI is part of a broader set of Fund policy proposals to improve coordination with RFAs, enhance liquidity provision for members, and ensure the cohesion of the Fund’s toolkit. The IMFC and the G20 called for further work to strengthen the GFSN and to improve cooperation between the Fund and regional financing arrangements (RFAs). In response, the Fund has produced a diagnostic of the GFSN and the Fund’s toolkit and identified important gaps. Introduction of the PCI, when considered together with the other proposals, will help to move towards a GFSN with improved coverage, more reliable support, and better coordination between the various layers.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498346618
Category : Business & Economics
Languages : en
Pages : 20
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Book Description
The global financial safety net (GFSN) has become larger and more decentralized, creating a need for greater coordination. The expanded GFSN has created multiple sources of official financing for countries in need of support to address balance of payments shocks. Enhanced coordination among these layers would facilitate a more efficient use of global resources and provide better incentives for implementing sound policies. A new non-financing Policy Coordination Instrument (PCI) would address gaps in the GFSN and the Fund’s toolkit. The new Policy Coordination Instrument is designed for countries that are seeking to unlock financing from multiple sources and/or to demonstrate a commitment to a reform agenda. It would enable a closer policy dialogue between the Fund and countries, more regular monitoring of economic developments and policies, as well as Board endorsement of those policies. It would be available for all member countries. The key design features draw on Fund financing arrangements and the Policy Support Instrument (PSI), with some important differences. These include no qualification criteria, a review-based approach for monitoring of conditionality, and a more flexible review schedule. The PCI is part of a broader set of Fund policy proposals to improve coordination with RFAs, enhance liquidity provision for members, and ensure the cohesion of the Fund’s toolkit. The IMFC and the G20 called for further work to strengthen the GFSN and to improve cooperation between the Fund and regional financing arrangements (RFAs). In response, the Fund has produced a diagnostic of the GFSN and the Fund’s toolkit and identified important gaps. Introduction of the PCI, when considered together with the other proposals, will help to move towards a GFSN with improved coverage, more reliable support, and better coordination between the various layers.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498346154
Category : Business & Economics
Languages : en
Pages : 29
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Book Description
in the Fund’s work stream on the Adequacy of the Global Financial Safety Net (GFSN). The paper follows the Executive Board’s discussion of the Adequacy of the Global Financial Safety Net—Review of the Flexible Credit Line and Precautionary and Liquidity Line, and Proposals for Toolkit Reform on June 30, 2017 (the "June paper"),1 and presents revised reform proposals in light of Directors’ views. In the absence of sufficient Executive Board support for a new liquidity facility, the paper proposes to retain the Precautionary and Liquidity Line (PLL). It also proposes to introduce a Time-Based Commitment Fee (TBCF) in light of many Directors’ support for this feature. 2. This work is part of the Fund’s broader work stream to strengthen the GFSN . As such, it complements the new non-financing Policy Coordination Instrument and operational principles and framework for future Fund engagement with Regional Financing Arrangements.2 3. The paper is organized as follows. Section II lays out the revised set of reform proposals. Section III sets forth issues for discussion, and proposes decisions to (i) complete the review of the Flexible Credit Line (FCL) and the PLL; and (ii) introduce a TBCF. The paper also includes an Annex that describes a planned revision to the presentation of the Fund’s Forward Commitment Capacity (FCC) to provide a breakdown between precautionary and other Fund commitments.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498346138
Category : Business & Economics
Languages : en
Pages : 87
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Book Description
protracted global uncertainty combined with frequent episodes of capital flow volatility have intensified demand for liquidity support. In response to calls from the IMFC and the G20, the Fund has identified gaps in the global financial safety net (GFSN) and the Fund’s lending toolkit for crisis prevention, including insufficient coverage against liquidity pressures resulting from volatile capital flows. The proposals in this paper draw on the previous Fund work on the adequacy of the GFSN, the review of the Fund’s current toolkit for crisis prevention, and extensive consultations with the membership. The review of the FCL concludes that the FCL has been effective in providing precautionary support against external tail risks. Successor FCL arrangements and associated access levels have been in line with the assessment of external risks and potential balance of payments needs. However, there is scope to strengthen the transparency and predictability of the qualification framework by adding indicator-based thresholds to complement and inform judgment. To enhance crisis resilience while improving the Fund’s toolkit coherence and resource use, the paper proposes three complementary reforms: The establishment of a Short-term Liquidity Swap to provide renewable and reliable liquidity support against potential short-term moderate volatility of capital flows. The proposed instrument is for members with very strong fundamentals and economic policies, and tailored to improve reliability and appeal to users. The use of a core set of indicators with thresholds to guide judgment in FCL qualification. This will improve predictability and transparency while keeping the standards unchanged. The elimination of the PLL to maintain a streamlined and coherent toolkit, given the low use of the PLL, likely reflecting issues of tiering with the FCL. The paper also discusses possible reforms of the current commitment fee policy to promote a more balanced use of Fund resources. Possible options include increasing the commitment fee at high access levels or introducing a new time-based commitment fee.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498346162
Category : Business & Economics
Languages : en
Pages : 42
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Book Description
liquidity in the face of increased vulnerabilities calls for enhancing the liquidity support provided through the global financial safety net (GFSN). The global economy is experiencing a period of protracted uncertainty, marked by frequent episodes of volatility. Demand for liquidity has intensified, in particular from emerging markets, which are experiencing a build-up of vulnerabilities and the depletion of their fiscal buffers. The enhanced GFSN meets only partially this higher demand for liquidity. The IMFC and G20 have called on the Fund to further strengthen the safety net. The uneven use of the Fund’s toolkit for crisis prevention suggests the need to reconsider its design. Despite a major overhaul of the Fund’s lending instruments available for precautionary financing, only a modest number of countries have used them. In particular, the lack of access to a liquidity backstop for members with strong policies—similar to the standing bilateral swap arrangements (BSAs) among central banks—limits the availability of Fund support over the whole duration of the shock during protracted periods of global uncertainty. Moreover, the need to resort to Fund financing still carries a high political cost (stigma) for some members. To enhance further the Fund’s toolkit for crisis prevention, consideration could be given to revisiting the existing toolkit and introducing new instruments. The toolkit could thus be enhanced by: establishing a new facility for precautionary financing that would provide a "standing" liquidity backstop to members with strong fundamentals and policies for use when hit by liquidity shocks; and adjusting the existing toolkit to maintain cohesion. Any change to the Fund toolkit would need to take into account the tradeoffs between reducing stigma and containing moral hazard, while simultaneously safeguarding Fund resources. A Fund policy monitoring instrument could improve the cohesion of the global safety net. As the GFSN has expanded and become more multi-layered, there is a need to improve cooperation across the different layers to unlock financing and signal commitment to reforms. Creating a policy monitoring instrument that is available to all Fund members could help in this regard. Next steps . In light of Directors’ views on these points, staff could come back with subsequent papers that lay out specific and detailed proposals for reforming the lending toolkit. While these papers focus on the GRA lending toolkit, a separate forthcoming paper will assess some aspects of the concessional lending toolkit.
Author:
Publisher:
ISBN:
Category : Bank failures
Languages : en
Pages : 49
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Book Description
"The Global Financial Safety Net (GFSN) is comprised mainly of countries' own reserves and external public sources of insurance and financing. The main external official arrangements are central bank bilateral swap arrangements (BSAs), regional financial arrangements (RFAs), and the Fund. The safety net seeks to provide countries with insurance against crises, financing when shocks hit, and incentives for ound macroeconomic policies."--Summary.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 39
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Book Description
This note provides updated general guidance on the use of the Policy Coordination Instrument (PCI). The PCI is a non-financing instrument designed for countries that, at the time of the PCI request, are seeking to unlock financing from sources other than the Fund and/or to demonstrate a commitment to a reform agenda. Since its establishment in 2017 as part of the Fund’s work on the Global Financial Safety Net, the PCI has been used by several members. These experiences helped establish and refine best practices, which are reflected in this updated operational guidance note together with changes to the PCI policy approved by the Executive Board on October 4, 2023. The note covers operational issues in a broad range of areas such as purpose, objectives, eligibility, modalities, applicability of UFR-related and other relevant policies, design of a PCI-supported program, conditionality framework, review schedule , and a comparison with other lending instruments. The note is an aid to the implementation of the PCI policy and its underlying principles. If there is any instance in which a provision of the guidance note or its implementation conflicts with the policy approved by the Board, the PCI policy shall prevail.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 65
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Book Description
The Policy Coordination Instrument (PCI) is a non-financial instrument designed to help countries demonstrate commitment to a reform agenda and unlock financing from other sources. Established in 2017, the PCI aims to support countries in designing and implementing a full-fledged macroeconomic program of policies to address imbalances, prevent crises, build buffers, and enhance stability. The PCI enables closer cooperation with the Fund in cases where countries commit to upper-credit tranche (UCT) quality policies and more intensive monitoring. However, at the time of requesting a PCI, such countries must not be seeking financial assistance from the General Resources Account (GRA) and the Poverty Reduction and Growth Trust (PRGT). The design, request, and review process of the PCI are structured based on Fund arrangements, with several design features drawing on the Policy Support Instrument (PSI). Similar to the PSI, the PCI is a form of technical assistance. However, unlike the PSI, which is restricted to PRGT-eligible members, the PCI is available to all member countries.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498310877
Category : Nature
Languages : en
Pages : 72
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Book Description
The Fund is facing strong demand for financing from low-income countries (LICs). Commodity price shocks and loose fiscal policies have contributed to rising debt levels and financing needs in many countries. Several developing states, especially smaller ones, are also increasingly vulnerable to large natural disasters. At the same time, many LICs less dependent on commodity exports have enjoyed robust growth in recent years, with more contained vulnerabilities.
Author: International Monetary Fund. Legal Dept.
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 1064
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Book Description
This volume is the Forty-Third Issue of Selected Decisions and Selected Documents of the International Monetary Fund. It includes decisions, interpretations, and resolutions of the Executive Board and the Board of Governors of the International Monetary Fund, as well as selected documents, to which frequent reference is made in the current activities of the Fund. In addition, it includes certain documents relating to the Fund, the United Nations, and other international organizations.
Author: International Monetary Fund. Strategy, Policy, & Review Department
Publisher: International Monetary Fund
ISBN: 1498346537
Category : Business & Economics
Languages : en
Pages : 44
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Book Description
The Global Financial Safety Net (GFSN) has expanded considerably since 2008, including in the non-traditional elements of the safety net such as Regional Financing Arrangements (RFAs). The resulting multi-layered structure of the GFSN makes collaboration between its various elements more important than in the past. Specifically, stronger collaboration between the Fund and RFAs would help increase the effective firepower of the GFSN and ensure a timely deployment of resources. The Fund’s experience in macroeconomic adjustment and its universal risk pooling would combine with the greater regional knowledge and country ownership brought the RFA. In this way, improved collaboration between the Fund and RFAs, including in co-financing, would significantly reduce the risk of contagion by encouraging countries to seek early assistance from the Fund. This paper is part of a broader set of proposals to fortify the GFSN (IMF, 2017b, c, d). It proposes both modalities for collaboration—across capacity development, surveillance, and lending—and some operational principles to help guide future co-lending between the Fund and the various RFAs. To date, the only operational guidance to facilitate collaboration has been limited to the high-level 2011 G20 Principles for Cooperation between the IMF and RFAs. Building on several case studies and the principles derived from them, this paper proposes an operational framework for future engagement. It aims to start a more structured dialogue between the Fund and individual RFAs on the modalities of how best to work together.
