Read on Twitter
1/ IMF as lender of last resort @KGeorgieva commented today that "we are discussing a new short-term liquidity line for countries with strong policies." Some of emerging economies already have access to Fed's swap lines including Brazil and Mexico. Most others don't
2/ This leaves room for the IMF to act as a lender of last resort in FX as the Fed might not want to take on more credit risk via swaps ($ for local currency) and for repos need to have USTs (reserves), possibly issue with pricing https://twitter.com/elinaribakova/status/1250432968574656513?s=20
3/ What does the @IMFNews have already?
a. Flexible Credit Line, unlimited, but countries need to pre-qualify. So far Mexico, Poland, Colombia (just applied again to re-open) have used it.
a. Flexible Credit Line, unlimited, but countries need to pre-qualify. So far Mexico, Poland, Colombia (just applied again to re-open) have used it.
4/ pre-qualification criteria for the Flexible Credit Line are numerous and I find hart to follow, likely because of the IMF's need to safeguard resources as it is unlimited.
5/ b. Precautionary and Liquidity line. up 125% of quota for 6 months, cumulative 500% of quota after 12 month of good progress. Some assessment/conditionality.
Only one country has ever used it -- Morocco.
Only one country has ever used it -- Morocco.
6/ The key issue with FCL (unlimited, hard to qualify) and PLL (limited, easier to qualify, but why not a program then) countries either do not want them, or do not seem to be able to qualify for them. The facilities didn't fully remove stigma attached to the IMF borrowing.
7/ There was a proposal not approved by the IMF board to replace the facilities with a new one. New SLS would be still capped at 145% of quota to provide support against medium-sized BOP shocks of a special nature.
https://www.imf.org/en/Publications/Policy-Papers/Issues/2017/12/19/pp121917-adequacyofgfsn-proposalsfortoolkitreform
https://www.imf.org/en/Publications/Policy-Papers/Issues/2017/12/19/pp121917-adequacyofgfsn-proposalsfortoolkitreform
8/ This is how the SLS proposed at the time compares to the FCL that exists now.
9/ Key question: does it resolve anything at all? I do not think so. This version of the SLS appears too small to matter, doesn't remove the stigma of borrowing from the IMF, and is unlikely to be processed fast enough.
Looking forward to comments!
Looking forward to comments!
10/ Recent suggestion by @RaminToloui.
My key concern that many #EmergingMarkets and most FMs don't have reliable liquid CDS, especially in times of stress.
- allocation $100-$200bn.
- CDS spreads as criteria
- best borrowers 250 of quota
https://siepr.stanford.edu/research/publications/what-imf-can-do-now-confront-covid-19
My key concern that many #EmergingMarkets and most FMs don't have reliable liquid CDS, especially in times of stress.
- allocation $100-$200bn.
- CDS spreads as criteria
- best borrowers 250 of quota
https://siepr.stanford.edu/research/publications/what-imf-can-do-now-confront-covid-19
