Creation of global financial safety nets aims to prevent economically robust countries from going bankrupt due to temporary liquidity lacks. This agenda is already halfway through success.
To cut the vicious cycle, South Korea, the host country of the G20 Seoul Summit has put out ‘the Korea Initiative’ that contains creation of global safety nets.
The first phase of the initiative went successfully. The International Monetary Fund (IMF) adopted a Flexible Credit Line (FCL), which is an expanded version of the Short-term Liquidity Facility (SLF). Along with that, a Precautionary Credit Line (PCL) was introduced for countries those who carry out sound economic policies but do not qualify for the FCL.
The G20 Seoul Summit focuses on preparing specific and practical measures that will run financial safety nets.
Global financial safety nets, indeed, can be the foundation for addressing global imbalances. Emerging economies are accumulating excess foreign exchange reserves in fear of the repeat of the Asian crisis. China was in possession of $2.65 trillion in reserves as of September. Korea had $289.7 billion in its reserves, while Taiwan saw its reserves soar to $370 billion at the same time......
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