International relations

Manuel welcomes IMF credit line

27 March 2009

South African Finance Minister Trevor Manuel has welcomed the International Monetary Fund (IMF) board's approval of a major overhaul of the IMF's lending framework.

This new framework, announced on Tuesday, establishes a new instrument, the Flexible Credit Line (FCL), for countries with strong economic fundamentals and a good record of fiscal management, policies and policy implementation.

According to South Africa's Treasury, this should be seen as part of the overall reform of the IMF, as the institution continues to become more sensitive to the needs of emergent and developing economies.

"The FCL provides for large, upfront financing on a precautionary basis and better tailoring conditionality to countries' varying strengths and circumstances," the Treasury said in a statement this week.

"At a time when the global economy is experiencing the deepest and most widespread crisis in recent history, this facility together with increased lending access limits and simplified terms for borrowing, will enable the IMF to better respond to the various needs of all member countries."

Useful for developing countries

The Flexible Credit Line will be especially useful for developing countries that have experienced a disproportionately large impact in this current financial crisis, as many have experienced large capital outflows, falling prices for primary commodities, a sharp contraction of exports and declining remittances.

"Though South Africa is fortunately not in need of this facility given the robustness of our financial sector, we recognise that this facility will assist many more countries to deal with the challenges they face, and in the process ensure a more co-ordinated response to the global economic crisis," the Treasury said.

In September, Manuel was chosen to chair the Committee on IMF Governance Reform, which was tasked with formulating plans to bring the organisation back to the centre of the world economy.

SAinfo reporter