IMF unveils report on global finance’s adequacy  

The International Monetary Fund (IMF) has unveiled its report on the state of global financial capability, which assesses its strength, weaknesses and challenges, as part of the Fund’s ongoing review of the international monetary system.

The report, in a paper titled “The Adequacy of the Global Financial Safety Net (GFSN),” comprises international reserves, central bank swap arrangements, regional financing arrangements, Fund resources (complemented by other multilateral and bilateral development partners), and market-based instruments.

It noted that GFSN is currently 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, while several features of the GFSN have also been enhanced over time.

Specifically, the refinements to the IMF’s surveillance and lending frameworks were deemed to have filled important gaps in the system, although the study also pointed out that there is opportunity for improving the current configuration of the safety net.

The improvement, it noted was 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.

“Indeed, the multi-layered system, though diversified and flexible, has also led to uneven coverage across countries and uneven policy implementation. Additionally, many of the elements of protection are costly for borrowers – either from a financial perspective like reserves and commodity hedging or from a political perspective- issues of stigma related to access to Fund arrangements.  Moreover, most country groupings remain underserved by the system, lacking access to predictable and reliable funding,” a statement from IMF noted.

As a next step, IMF said its staffers will continue the technical work on possible avenues for reforms going forward, as GFSN is also a priority of the Group of 20 and will be discussed by ministers of finance and central bank governors in the upcoming High-Level Seminar on International Financial Architecture in Paris, France, tomorrow.