IMF: Global Financial Safety Net disappoint many emerging markets

March 28 , 2016

International Monetary Fund said in a new research paper published on Monday that the financial safety net set up by the central banks and exporters and the IMF have grown in recent years but have not succeeded in protecting many of the emerging market countries of the global economic shocks.

He said that the accumulation of foreign exchange reserves increased since the global financial crisis in 2007-2009, although there are more bilateral swap agreements among central banks but that benefited mainly the developed economy. The IMF said that some emerging economies may still suffer from financing gaps in times of crisis.

Designed paper prepared by IMF staff to launch discussions between Member States and 188 in connection with reforms to strengthen the global financial safety net. She said that the first step is to assess the appropriateness of the current system, which it described as an adult and did not test the fragmentation and costly.

Christine Lagarde, director of the International Monetary Fund was called in February to expand the precautionary financing instruments to help emerging markets to cope with shocks.

During the financial crisis, the central banks in the United States, Canada, European Union, Japan, Britain, Switzerland and activate swap agreements developed economies helped to contain systemic risk.

But emerging markets were not a party to this swap lines and had, according to the paper Monetary Fund to accumulate foreign exchange reserves are high cost.

Among the few options available to resort to emergency lending to the IMF's trillion dollar reserves, but that carries a stigma market, political and perhaps approval be very slow during the financial crisis.

The paper proposed a reform option is to launch the rehabilitation process critical to reduce the recourse to lending reserves in order to obtain liquidity during economic shocks.

Another option is to strengthen the cooperation between the central banks and governments, regional and lending structures that make up the financial safety net, according to the paper.

The paper will be discussed by central bankers and finance ministers of the Group of Twenty nations meeting to be held on Thursday in Paris.
Updated on March 28 , 2016 | Source: Reuters |