Global Financial Safety Net

The Global Financial Safety Net (GFSN) consists of a set of institutions and mechanisms that seek to provide insurance against crises and mitigate their impact. As the only global institution with a formal mandate of assisting countries when no one else would, the International Monetary Fund (IMF) stand at the center of the GFSN. While the IMF’s role and function in the global economy is thus vital, the deep transformational processes the world is undergoing require the IMF to be made fit for purpose. Some of these processes include changes in geopolitical and economic powers, changes in the speed and form of globalization, impacts of climate change, and profound technological transformations. If the IMF does not adapt to this changing environment, it risks becoming irrelevant.
Making the IMF fit for purpose requires both fundamental and strategic reforms, including aligning voting shares with each member’s economic relevance, reassessing the IMF’s financial firepower and income model to better serve its membership, revising the IMF’s lending rate policy, and strengthening the Fund’s role as ‘lender of last resort’, with better equipped emergency liquidity facilities to help countries anticipate and mitigate financially instability including debt sustainability. Strengthening the GSFN also requires improving existing and establishing new mechanisms for re-channeling Special Drawing Rights.