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IMF takes steps to enhance crisis management toolkit

(Xinhua)

09:14, November 23, 2011

WASHINGTON, Nov. 22 (Xinhua) -- The International Monetary Fund (IMF) announced on Tuesday that its Executive Board had approved a range of reforms to bolster the flexibility and scope of its lending toolkit to provide more effective liquidity and emergency assistance to its global membership to tackle crisis contagion.

The new reforms "will enable the Fund to respond better to the diverse liquidity needs of members with relatively strong policies and fundamentals, including those affected during periods of heightened economic or market stress, the crisis-bystander, and to address urgent financing needs arising in a broader range of circumstances than the natural disasters and post-conflict situations previously covered," the Washington-based agency said in a statement.

The reform replaces the Precautionary Credit Line (PCL) with the more flexible Precautionary and Liquidity Line (PLL), which can be used under broader circumstances, including as insurance against future shocks and as a short-term liquidity window to address the needs of crisis bystanders during times of heightened regional or global stress and break the chains of contagion, said the global lender.

An IMF member can seek financing support from the newly- designed PLL when it has either a potential or actual balance of payments need at the time of approval of the arrangement, rather than only a potential need required under the PCL, so the PLL can be used both as a crisis-prevention and a crisis-resolution tool.

Moreover, the Fund's current instruments for emergency assistance, namely the Emergency Natural Disaster Assistance and the Emergency Post-Conflict Assistance, are consolidated under the new Rapid Financing Instrument (RFI), which may be used to support a full range of urgent balance of payments needs, including those arising from exogenous shocks, noted the statement.

The RFI "broadens coverage of urgent balance of payments needs beyond those arising from natural disasters and post-conflict situations, and can also provide a framework for policy support and technical assistance," said the IMF.

"I commend the Executive Board for the expeditious response to support the membership in these difficult times. The Fund has been asked to enhance its lending toolkit to help the membership cope with crises. We have acted quickly, and the new tools will enable us to respond more rapidly and effectively for the benefit of the whole membership," said IMF Managing Director Christine Lagarde.

"The reform enhances the Fund's ability to provide financing for crisis prevention and resolution. This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness," Lagarde added.

 
 
 
 
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