International Monetary Fund sets up new lending facility to ease liquidity woes

The International Monetary Fund (IMF) has created a new short-term lending facility for countries with strong policies and good track records but which are facing temporary liquidity problems amid the current global financial turmoil.

The Short-Term Liquidity Facility (SLF), approved yesterday by the IMF’s Executive Board, comes with no conditions attached once a loan has been approved and offers large upfront financing to help countries restore confidence and maintain stability.

“Exceptional times call for an exceptional response,” stated IMF Managing Director Dominique Strauss-Kahn, as he announced the establishment of the new facility.

“The ongoing turmoil in global capital markets has led to significant liquidity difficulties for some emerging market countries, even those that have maintained sound macroeconomic frameworks and have sustained histories of market access,” he noted.

Existing IMF loan facilities offer flexibility but are mainly intended for countries that require both financing and policy adjustment, and not for countries that despite strong initial macroeconomic positions and policies are facing short-term liquidity pressures.

“This new facility addresses that gap in the Fund's toolkit of financial support,” he said

Mr. Strauss-Kahn added that the Fund is responding quickly and flexibly to requests for financing.

“We are offering some countries substantial resources on an expedited basis, with conditions based only on measures absolutely necessary to get past the crisis and to restore a viable external position,” he said.