Via IMF (Den Internationale Valutafond)

IMF Executive Board – IMF COVID-19 Response—A New Short-Term Liquidity Line to Enhance the Adequacy of the Global Financial Safety Net

April 22, 2020

The Covid-19 pandemic has created severe disruption in the global financial
system, with many emerging market and developing countries (EMDCs) facing
liquidity shortages. In the context of intensified demand for liquidity and
heightened global uncertainty, on April 15, 2020 the IMF Executive Board
approved a Short-term Liquidity Line (SLL).

The SLL is a special facility designed as a revolving and renewable
backstop for members with very strong fundamentals and policy track
records. It provides liquidity support for members facing potential
short-term moderate balance of payments difficulties, reflected in
pressures on the capital account and reserves, and resulting from
volatility in international capital markets. The SLL aims to reduce the
impact of liquidity events and minimize the risk of shocks evolving into
deeper crises and generating spillovers to other countries.

Executive Board Assessment


Executive Directors considered and approved the establishment of the
Short‑term Liquidity Line (SLL), as part of the Fund’s COVID‑19 response.
They noted that the SLL would fill a gap in the Fund’s toolkit and
complement other layers of the global financial safety net. Directors
agreed that the SLL can provide important liquidity support to members with
very strong policy frameworks and fundamentals facing potential short‑term
moderate balance of payments (BOP) difficulties, as specified in the
proposed decision. They noted that this could help prevent liquidity
pressures developing into solvency crises and avoid spillovers to the
broader membership. Despite some differences in views and preferences,
Directors were willing to support the proposal in a spirit of compromise.

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Directors broadly supported the core design features of the SLL, built on
the work done in 2017. They considered that the revolving access of up to
145 percent of quota should provide cover against most repeated moderate
shocks that the SLL is designed to address, and that the availability of
successor arrangements, subject to continued qualification and the presence
of the special BOP need, would ensure that the SLL is a reliable backstop.
Directors also noted that having the same high qualification bar as the
Flexible Credit Line (FCL) would facilitate transition from the FCL to the
relatively lower access of the SLL, allowing more efficient allocation of
Fund resources. A few Directors would have preferred a lower qualification
bar and/or higher access.

Directors generally supported the innovative features of the SLL designed
to minimize perceived stigma associated with Fund financing, including the
Board’s approval of an arrangement, conditional on the member availing
itself of the arrangement. They recognized the possibility of a Central
Bank sole signatory, provided that certain requirements are met, consistent
with the Fund’s standards for the signatory of letters of intent or written
communications. A few Directors noted that signatures from both the
Ministry of Finance and the Central Bank would increase the credibility of
the policy commitment. Directors emphasized the need for careful
communication in cases where a member ceases to qualify for an SLL

Directors took note of staff’s assessment that SLL usage is likely to have
a limited impact on the Fund’s liquidity position. At the same time, some
Directors pointed to second‑round effects should countries draw on the SLL
and no longer participate in the Financial Transactions Plan and/or the New
Arrangements to Borrow (NAB). A few Directors also noted the possibility
that the SLL could tie up Fund resources for an extended period. Directors
recognized that the potential demand for the SLL combined with other
Covid‑19 related demand for Fund resources could quickly reduce Fund
liquidity to levels that would warrant an activation of the NAB. Given
these considerations amid the uncertain global outlook, Directors called
for closely monitoring the Fund’s liquidity position.

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Directors supported the creation of the SLL for a period of 7 years, with
an expectation that, by end‑2025, the Executive Board will decide whether
to extend the facility beyond the 7‑year period. They agreed that this
compromise approach would balance concerns about the innovative nature of
the SLL and the potential impact on Fund resources. Directors looked
forward to reviewing the initial experience with the SLL, as part of the
next review of the Fund’s FCL and Precautionary and Liquidity Line in 2022.


At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found

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