International Monetary Fund (IMF) launched a new lending facility and the facility to reform the Flexible Credit Line (FCL) in line with increased demand for liquidity to anticipate crises.
New facility is named Precautionary Credit Line (PCL). The loan is designed for member countries with monetary policy and strong macro but does not meet the criteria FCL because it has a moderate vulnerability to crisis.
“This is part of an effort to strengthen the global financial sector safety net. FCL new and PCL will help us to help member countries take refuge from excessive market volatility, “said IMF Managing Director Dominique Strauss-Kahn in his official site, today.
Formation of PCL and FCL reforms carried out in line with the plan of the G-20 groups an agenda to strengthen the global financial sector safety nets in the High Level Conference in Seoul, South Korea in November.
FCL reforms include increased two-fold the duration of the loan is one year or two years with a review after one year. Previously, FCL loan period is six months or one year with a review after six months.
In FCL new, maximum limits withdrawals in 1000% of quota does not apply anymore. Withdrawal procedures are also strengthened by the early involvement of the Executive Council in assessing the scale of the withdrawal and withdrawal effects on the liquidity the IMF loan.
FCL was first launched in October 2008 and then modified in March 2009 for member countries that have macro-economic fundamentals and monetary policy and strong. Loans have the flexibility to withdraw because it does not fix the terms (conditionality).
Meanwhile, in the PCL, the facility is idle funds. Semi-annual review conducted and funds may be accessed in advance up to 500% of quota and up to 1000% of quota after 12 months.