Regional Financing Arrangements (RFAs) are mechanisms or agreements through which groups of countries mutually pledge financial support to countries experiencing financial difficulties in their regions.
The ESM is the Regional Financing Arrangement for the euro area, while a few other world regions (e.g. Latin America, South-East Asia) have their own RFAs. Together they are the regional lines of defence in the Global Financial Safety Net (GFSN), which helps to prevent and mitigate the effects of economic and financial crises.
The ESM was one of the initiators of a dialogue between RFAs and the IMF, and among RFAs themselves. Since 2016, an annual high-level dialogue takes place during the IMF Annual Meetings to foster policy exchanges among RFA leaders and the IMF.
The goal of achieving more effective cooperation between the IMF and RFAs was included in the G20 Hamburg Action Plan adopted in July 2017.
Video: How the ESM contributes to global financial safety (Length: 1:29)
1 ASEAN+3 Macroeconomic Research Office (AMRO), an international organisation since February 2016, functions as an independent surveillance unit of the CMIM.
It consists of four layers: countries can self-insure against external shocks using foreign reserves or fiscal space at national level. At the bilateral level, there are swap lines concluded bilaterally among countries. At regional level, the protection comes from Regional Financing Arrangements. And finally, the IMF provides a global financial backstop.
An adequately resourced and well-coordinated GFSN will contribute to the macroeconomic and financial stability in the international monetary system. The first high-level dialogue of RFAs held in Washington in October 2016 established a regular framework for policy dialogue and coordination at the highest level among RFAs, with the IMF, and the G20 International Financial Architecture Working Group.