The Executive Board
of the International
Monetary Fund (IMF)
today approved the
creation of the
Short-Term Liquidity
Facility (SLF) to
establish
quick-disbursing
financing for
countries with
strong economic
policies that are
facing temporary
liquidity problems
in the global
capital markets.
"I am very pleased
to announce that the
Executive Board has
approved the
establishment of a
new facility for
market access
countries—the
Short-Term Liquidity
Facility," stated
Mr. Dominique
Strauss-Kahn,
Managing Director of
the IMF. "The
ongoing turmoil in
global capital
markets has led to
significant
liquidity
difficulties for
some emerging market
countries, even
those that have
maintained sound
macroeconomic
frameworks and have
sustained histories
of market access.
Existing Fund loan
facilities offer
flexibility.
However, they are
fundamentally used
for countries that
require both
financing and policy
adjustment, and not
for countries that
despite strong
initial
macroeconomic
positions and
policies are facing
short-term liquidity
pressures. This new
facility addresses
that gap in the
Fund's toolkit of
financial support."
Mr. Strauss-Kahn
emphasized that the
IMF is committed to
promoting a
coordinated and
cooperative approach
to dealing with the
current crisis.
"Exceptional times
call for an
exceptional
response," Mr.
Strauss-Kahn said.
"The Fund is
responding quickly
and flexibly to
requests for
financing. We are
offering some
countries
substantial
resources on an
expedited basis,
with conditions
based only on
measures absolutely
necessary to get
past the crisis and
to restore a viable
external position,"
he said.
Mr. Strauss-Kahn
also welcomed the
announcement today
by the U.S. Federal
Reserve, the Banco
Central do Brasil,
the Banco de México,
the Bank of Korea,
and the Monetary
Authority of
Singapore of the
establishment of
temporary reciprocal
currency
arrangements (swap
lines). These two
independent
facilities, like
those already
established with
other central banks,
are designed to help
improve liquidity
conditions in global
financial markets
and to mitigate the
spread of
difficulties in
obtaining foreign
currency funding in
fundamentally sound
and well managed
economies.
Outline of the
IMF's new Short-Term
Liquidity Facility (SLF):
Purpose:
Establishes a
facility through
which large,
upfront,
quick-disbursing
short-term
financing, using
existing IMF
resources, can be
provided to
countries with
strong policies and
a good track record
but which are facing
temporary liquidity
problems arising
from developments in
external capital
markets.
Terms:
Disbursement of Fund
resources can be up
to 500 percent of
quota, with a
three-month
maturity. Eligible
countries are
allowed to draw a
maximum of three
times during any
12-month period.
Eligibility:
Countries with track
records of sound
policies, access to
capital markets and
sustainable debt
burdens. Policies
should have been
assessed very
positively by the
IMF in its most
recent Article IV
discussions. Given
this strong emphasis
on past performance,
financing is made
available without
the standard
phasing, performance
criteria,
monitoring, and
other conditionality
of a Fund
arrangement.
However, borrowers
are expected to
continue their
commitment to
maintain a strong
macroeconomic policy
framework.
In announcing the
SLF, Mr.
Strauss-Kahn
underscored that
"The IMF will
respond to this
crisis with all the
necessary financing.
We are prepared to
use our own
resources and to
work with others to
generate additional
resources to make
sure that countries
have the money they
need to restore
confidence and
maintain stability."
