What exactly is the Global Financial Safety Net (GFSN)?
The GFSN has a triple objective vis-à-vis sovereign governments: to provide precautionary insurance against a crisis; to supply liquidity when crises hit; and to incentivize sound macroeconomic policies.
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.
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.