IMF had initiated a new credit line on 24 March 2009to support strong performing countries. The credit line was to provide a different kind of signal – only countries which had strong macroeconomic fundamentals would get this credit line. Some economies were facing pressures despite having sound macroeconomics in places. So this credit line would distinguish the goods from the others. Though, IMF has another facility for the same set of countries it was not very useful:
The terms of the FCL represent a strengthening of the earlier Short-Term Liquidity Facility (SLF), which therefore will be discontinued. While the SLF was also designed to cater only to very strong-performing members, several of its design features—including its capped access and short repayment period, as well as the inability to use it on a precautionary basis—limited its usefulness to potential borrowers. The concept of a credit line available for either crisis prevention or resolution and dedicated for only very strong-performing countries, with all its flexible features is new.
Mexico was the first to express its interest in the credit line in the April G-20 meeting. Now Mexico, Poland and Colombia have taken this facility. The credit line is worth USD 47 bn, 20.5 bn and 10.4 bn respectively. Here is IMF country research on the respective countries: Mexico, Poland, Colombia. This should give some idea on the relative strength of the economies. However, I still think IMF should have released a one pager on each economy justifying the inclusion.
It is really interesting to see how times are changing. Mexico in particular is always on the other side of the crisis and this time it is seeking a IMF credit line to distinguish itself from the crowd. It will be interesting to see whether this credit will be effective. If it is, it will give IMF the much needed push into global economic policies.
I am sure it will be a good topic of research in signalling and international economics. We have just seen a fantastic paperwhich suggests Fed swapline was to help US banks and not necessarily because the countries faced USD funding pressures.