Global Financial Safety Net Tracker (GFSN tracker)
Global Financial Safety Net Tracker (GFSN tracker) will provide a real-time tracking of the GFSN that currently includes a large number of increasingly big Regional Financial Agreement (RFAs) in all continents, bilateral currency swaps between central banks, crisis lending by multilateral development banks, bilateral short-term loans, repo agreements, and hedging instruments by central banks. Effectively, the GFSN tracker will identify all relevant sources of liquidity for the most vulnerable countries.
The Global Financial Safety Net Tracker: Lessons for the COVID-19 Crisis from a New Interactive Dataset28 April 2021
The world economy has gone into a freefall due to the COVID-19 pandemic. At the same time, policy-makers have a broader range of
institutions to draw on for international liquidity support than before the global financial crisis 2008/09. Since the 2008/09 crisis, the
so-called Global Financial Safety Net (GFSN) of institutions for short-term crisis finance has evolved into an uncoordinated patchwork
of global, regional, and bi-lateral sources of support that lacks the resources to adequately prevent and mitigate the kinds of financial
instability we are now witnessing.
According to estimates from a new interactive database compiled by the Latin American Institute at Freie Universität Berlin (LAI) and
the Global Development Policy Center at Boston University (GDP Center), the financing available from the fledgling GFSN has reached
about USD 3.5 trillion, or 4 percent of global GDP. Today, the IMF with its approximately USD 1 trillion lending capacity is by far not the
only actor to provide emergency liquidity. Both regional financial arrangements (RFA) and bilateral currency swaps provide significant
liquidity. While the level of support is larger than a decade ago, it is still less than one percent of total financial assets.
However, the distribution of availability of the GFSN is highly uneven and unequal, with many countries only having access to a relatively
small portion of the GFSN, and some having few options altogether. Our data show that in 2018, about half of the IMF member
countries only had access to the IMF. This concerns predominantly Sub-Saharan Africa and most parts of Latin America. In contrast,
most countries in Europe, Eurasia, and Southeast Asia have access to powerful regional funds and/or have access to US Federal
Reserve or People’s Bank of China swaps. This means these countries are much better equipped to weather sudden stops and liquidity
crunches of the kind the world is currently experiencing.
The GFSN should not only increase its loanable funds. There is also an urgent need to coordinate the different elements of the GFSN. The status quo fire power of the GFSN can be used in a fruitful manner only if the diverse actors can begin to cooperate on different levels, while preserving their respective policy autonomy. An important element for this coordination will be a transparent and accessible information structure on the new, complex GFSN. To aid in this effort, LAI and the GDP Center recently launched the Global Financial Safety Net Tracker.
During the COVID-19 crisis, swaps between central banks played a major role in providing short term liquidity – accounting for almost 95 per cent of the value of transactions provided by the Global Financial Safety Net (GFSN). In the discussion below, we set out a description of these swaps, the role they play and how they came to be so important.
Enhancing understanding of external financial liquidity and sustainability:
Global Financial Safety Net Tracker and Sustainable Development Finance Assessment
Tuesday, 13 April 2021 – 2 to 3 p.m. (Geneva time)
The COVID-19 pandemic has exacerbated the economic, financial and debt vulnerabilities of low-income and middle-income developing countries (LICs and MICs), leaving their economies ravaged and floundering, and potentially undoing progress made toward sustainable development and the achievement of Agenda 2030. In response to the onset of the pandemic, the UN launched several development account projects including Response and Recovery: Mobilising financial resources for development in the time of Covid-19 co-ordinated by UNCTAD and in partnership with regional commissions, ECA, ECLAC and ESCAP. The project aims to enable member countries to diagnose their fragilities in the global and regional context and identify and design appropriate policy responses leading toward recovery and return to the development path.
The virtual seminar aims to enhance understanding of aspects of external financial liquidity and sustainability by showcasing two developments of the COVID-19 project:
- The UNCTAD-Boston University-Freie Universität Global Financial Safety Net Tracker, which tracks liquidity provision for all UN member states from different sources – including the IMF, Regional Financial Arrangements and bilateral central bank swaps.
- The Sustainable Development Finance Assessment (SDFA) – a framework which examines the capacity of developing countries to achieve the most significant SDGs in a way that is compatible with external financial and public debt sustainability.
The programme of the meeting is attached. Participants are encouraged to register through the following link: Meeting Registration - Zoom