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IMF Expands Loan Programs to Prevent Financial Crisis
Source: worldbank.org
Source Date: Tuesday, August 31, 2010
Focus: Knowledge Management in Government
Created: Sep 06, 2010

“The International Monetary Fund (IMF) said Monday it has expanded its lending programs to better prevent the occurrence of financial crises. The IMF said that its Executive Board decided to increase the duration and credit available under the existing Flexible Credit Line, while launching a new Precautionary Credit Line designed for member economies that may not necessarily meet FCL's qualification requirements. …” [Kyodo News/Factiva]

WP adds that “…A new precautionary credit line approved by the IMF board will allow countries with less-than-perfect economic track records to be preapproved for substantial loans that they can draw down quickly in a crisis.

It is the second such program the IMF has approved in recent months to allow it to respond more quickly to economic problems that develop in one country but threaten to spread to others. …’The need became increasingly clear to develop instruments that could serve as effective crisis-prevention tools’ in a world where money moves quickly across borders, said John Lipsky, first deputy managing director of the IMF. …The money under the new program will come with strings attached … but that would not hold up access to it in a crisis. The country would agree to a semiannual review. …” [The Washington Post]

Reuters reports that “…Under the new precautionary credit line, the IMF said any of its 187 member countries could request access and the board would decide on a case-by-case basis which ones qualify. Countries will be assessed against five broad areas, including fiscal and monetary policy and the health of their financial sector. Unlike the more rigorous qualification process for the flexible line, countries can win approval even if they fall a bit short in one or two categories. …

Lipsky said the Fund's member countries had ‘overwhelmingly’ supported creation of the new lending program and he was confident that it would be well received. He said the three countries that used the flexible credit line had renewed their agreements and investors had taken it as a good sign that these countries had qualified. …” [Reuters/Factiva]
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