The institutions and instruments of the Global Financial Safety Net (GFSN) represent the part of the global financial architecture that is responsible for providing an anti‐crisis and stabilization support to the countries in need. We argue that the standard understanding of the GFSN as a system consisting of four layers – national reserves, bilateral swaps, regional financing arrangements and the IMF – demands rethinking. We suggest the concept of an enlarged GFSN, namely its expansion by two additional elements – multilateral development banks and bilateral financial support. Both elements of the international financial architecture are partly involved in providing an anti‐crisis and macroeconomic stabilization support at concessional terms. We demonstrate how the enlarged GFSN functions, including at the time of the COVID‐19 crisis.
Policy Implications
- Despite the massive increase of available financial resources within the GFSN framework in the 2010s, close coordination among its elements and layers is still required. Coordination among the IMF, regional financing arrangements, multilateral development banks, and sovereign lenders may reduce the likelihood of moral hazard and facility shopping. Hence, the efficiency of an anti‐crisis function within the global financial architecture would rise.
- We suggest to expand the balance of available GFSN resources by including multilateral development banks’ stabilization loans as well as the bilateral sovereign anti‐crisis support into the GFSN framework in order to better understand the amount of funds available for crisis response, their specific conditions and terms.
- We call for more transparency in providing anti‐crisis bilateral support, in particular originating from emerging economies.