SA welcomes overhaul of IMF lending framework

Thursday, March 26, 2009

Pretoria - The Minister of Finance Trevor Manuel has welcomed the International Monetary Fund (IMF) Board's approval of a major overhaul of the IMF's lending framework.

This new framework, announced on Tuesday, establishes a new instrument, the Flexible Credit Line (FCL), for countries with strong economic fundamentals and a good record of fiscal management, policies and policy implementation.

According to the National Treasury, this should be seen as part of the overall reform of the IMF, as the IMF continues to become more sensitive to the needs of many more emergent and developing economies.

"The FCL provides for large, upfront financing on a precautionary basis and better tailoring conditionality to countries' varying strengths and circumstances.

"At a time when the global economy is experiencing the deepest and most widespread crisis in recent history, this facility together with increased lending access limits and simplified terms for borrowing, will enable the IMF to better respond to the various needs of all member countries," said the Treasury in a statement.

This facility will be especially useful for developing countries who have experienced a disproportionately large impact in this current financial crisis, as many have experienced large capital outflows, falling prices for primary commodities, a sharp contraction of exports and declining remittances.

Though South Africa is fortunately not in need of this facility given the robustness of our financial sector, we recognise that this facility will assist many more countries to deal with the challenges they face, and in the process ensure a more co-ordinated response to the global economic crisis.

The minister was chosen to chair the Committee on IMF Governance Reform tasked with formulating plans to bring the organisation back to the centre of the world economy last September.-

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