The International Monetary Fund’s (IMF) Executive Board approved a Short-term Liquidity Line (SLL), on the back of intensified demand for liquidity and increased uncertainty from the coronavirus (COVID-19) pandemic.
The ongoing pandemic has severely disrupted the global financial system, with many emerging markets and developing countries (EMDCs) facing liquidity shortages, an IMF statement on Wednesday said.
The Executive Board agreed to the SLL on 15 April. It is a unique facility designed as a revolving and renewable backstop for members with strong fundamentals and policy track records, the statement said.
The statement added that the SLL provides liquidity support for members facing potential short-term difficulties in the moderate balance of payments (BOP). This is reflected in pressures on the capital account and reserves, and resulting from volatility in international capital markets.
The SLL aims to reduce the impact of liquidity events and minimise the risk of shocks evolving into deeper crises and generating spillovers to other countries, the statement mentioned.
The Executive Directors approved the SLL as part of the IMF’s ongoing response to the coronavirus. They noted that it will complement other layers of the global financial safety net.
The SLL will be available for a period of seven years, with the Executive Board expecting to decide at the end of 2025 whether to extend the facility further.