By Richard Johnstone | 24 November 2011
The International Monetary Fund has changed its lending rules to help countries caught up in the global financial crisis.
The reforms will make it easier for the IMF to support what it calls ‘the crisis bystanders’ in light of the difficulties in the eurozone.Fears about the ability of some European countries to pay their debts have led to soaring borrowing costs and both Italy and Greece have put in place austerity plans under new governments.
IMF managing director Christine Lagarde said that the fund would now be in a better position to respond to the borrowing needs of members that have ‘sound policies and fundamentals’.
The change approved on November 22 replaces the Precautionary Credit Line with a more flexible Precautionary and Liquidity Line. This can be accessed under broader circumstances, including as a six-month short-term loan to meet needs at times of global stress.
Legarde said: ‘The fund has been asked to enhance its lending toolkit to help the membership cope with crises. We have acted quickly, and the new tools will enable us to respond more rapidly and effectively for the benefit of the whole membership.
‘The reform enhances the fund’s ability to provide financing for crisis prevention and resolution. This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness.’
To qualify for loans, a country will need to be assessed as having solid economic fundamentals and policy frameworks, and have a track record of implementing ‘sound policies’.
The new rules have been announced following confirmation on Monday that the government of Hungary had requested an IMF bail-out.
Lagarde said a similar request had been sent to the European Commission, adding: ‘The IMF team currently in Budapest will now return to Washington for consultations with the IMF’s management and the executive board.’
Since the start of the financial crisis and subsequent difficulties in the eurozone, the IMF has already agreed loans with countries including Greece, Ireland, Portugal and Poland.
