Posted

September 04, 2010 06:34:52 AM

Date

2010-06

Author

International Monetary Fund Staff

Affiliation

International Monetary Fund

Title

The Fund’s Mandate - The Future Financing Role - Reform Proposals

Summary /
Abstract

The global crisis has underscored the need for effective global financial safety nets to protect countries with sound policy frameworks from adverse outcomes. Complementing the traditional crisis resolution role of the IMF, which has been instrumental during the recent crisis and is expected to remain dominant going forward, further strengthening instruments to prevent crises and mitigate contagion in systemic events would contribute to the IMF’s mandate to secure global stability.

This paper proposes specific reforms of crisis prevention instruments, and separately presents further considerations for strengthening the IMF’s toolkit for dealing with systemic crises. The proposals, which have benefited from feedback from policymakers and other stakeholders, build on last year’s major overhaul of the IMF lending toolkit and the reform options considered earlier this year by the IMF Executive Board in the context of a broader review of the institution’s mandate.

Keywords

Fund role; Concessional aid; Flexible Credit Line; Precautionary Credit Line; Fund general resources; Access policy; Crisis prevention; Executive Board decisions

URL

http://www.imf.org/external/pp/longres.aspx?id=4471

Remarks

The discussion in this policy paper is relevant to the newly established AMRO of the ASEAN+3. Even a country with fundamentally sound economic policies and balance sheets, but with a high degree of integration into international capital markets, still faces a risk that capital account pressures could transform into a self-fulfilling run on its currency. Hence, there is a role for insurance provided by foreign exchange liquidity. Many ASEAN+3 members have self-insured by building up large international reserves positions, or have sought contingent lines of credit, including the CMIM.

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