The International Monetary Fund (IMF) today published the paper "The Adequacy of the Global Financial Safety Net," which the IMF’s Executive Board discussed 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), and market-based instruments.
The paper establishes that the GFSN today is much larger and more multi-layered than before, reflecting the accumulation of reserves, the expansion of bilateral and multilateral arrangements, and greater access to Fund resources. Several features of the GFSN have also been enhanced over time. Notably, the refinements to the IMF’s surveillance and lending frameworks have filled important gaps in the system. However, the study also recognizes that 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, and provide the right incentives for countries to implement sound macroeconomic policies.