IMF facilities seen as alternative for forex reserves

Daejeon, KOREA July 13, 2010 (LBO) – The International Monetary Fund (IMF) is considering creating new lending facilities to help countries cope with economic shocks and avoid the need to build costly foreign exchange reserves, officials said. Senior official from the IMF and South Korea, which is pushing the idea, said such a ‘global safety net’ would free up funds for badly needed investments instead of being held as reserves to ward off economic shocks.

“We are examining several options to strengthen our tools to help prevent crises and mitigate systemic shocks, including more tailored crisis prevention facilities and multi-country approaches,” said IMF managing director Dominique Strauss-Kahn.

“These tools would usefully complement countries’ own efforts at insuring themselves against shocks, and may also include cooperation with regional financing mechanisms,” he told the Asia 21 conference organised by the IMF in Daejeon, South Korea.

“We’re trying to see how the IMF can provide resources to countries not only when hit by a crisis but when they face the threat of instability . . . to be more active and play a participatory role to avoid a crisis rather than try to fix it afterwards.”

Jeung-Hyun Yoon, Minister of Stra