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ISDA & IIF urge G20 to ease acute USD liquidity shortage for emerging markets

In order to enhance dollar liquidity for Emerging Markets (EMs) and Developed Markets (DMs), the letter from ISDA and the Institute of International Finance (IIF) to G20 finance ministries and central banks recommends their co-operation with the IMF to take the following actions: 

• the Federal Reserve Board (FRB) to expand its swap lines to EMs beyond the countries that participated in 2008, where appropriate, recognising the FRB’s concerns with taking on credit risk;

• the G20 to use its influence to increase substantially the ‘cap’ of 50% of quota on the IMF’s Rapid Financing Instrument, which works as a liquidity line for EM countries;

• the G20 to use its influence with the IMF to urge the latter to consider its existing facilities or potential new facilities that would boost the reserves of EM and DM countries, which could allow those countries to take advantage of the FRB’s new FIMA Repo Facility; and

• the G20 countries to accelerate approval of the IMF’s proposal to double the New Arrangements to Borrow and to expand bilateral loans to the IMF.

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