SDG 17: Partnerships for the Goals | SDG 8: Decent Work and Economic Growth
Institutions: Ministry of Finance
The International Monetary Fund (IMF) has completed a review of the Global Financial Safety Net (GFSN): the complex system that cushions economies against global shocks, including international reserves, bilateral swap arrangements, regional financing arrangements, and the IMF itself. The review found that the GFSN has performed “reasonably well” during major crises like the Global Financial Crisis and the COVID-19 pandemic, successfully supporting financial stability. However, the report noted that the net didn’t face its ultimate test because extraordinary policy actions by major economies eased the demand for its resources.
A key finding is that while the GFSN is large, its coverage is uneven. Many low-income countries and emerging economies still lack reliable or sufficient access to the funds they need during a crisis. The core component, international reserves, varies widely in adequacy across countries. Furthermore, other layers, like bilateral swap arrangements, are often less transparent and their ability to provide full balance of payments support remains unproven.
The IMF concludes that the safety net is under increasing pressure due to more frequent shocks globally and dwindling national policy buffers. To strengthen the GFSN, the IMF recommends several policy goals: improving predictability, enhancing crisis preparedness by incentivizing strong national policies, and fostering better coordination across the system’s many layers.
This report underscores the policy priority of reforming the international financial architecture to ensure sustainable global stability, advocating for changes that specifically benefit developing countries and improve worldwide risk-sharing.
What is the Global Financial Safety Net (GFSN)? → The GFSN is the multilayered system comprising international reserves, bilateral swap arrangements, regional financing arrangements (RFAs), and the International Monetary Fund (IMF), designed to provide financing and cushion the impact of shocks to the global economy.
Follow the full paper here: https://www.imf.org/en/Publications/Policy-Papers/Issues/2025/10/09/The-Global-Financial-Safety-Net-A-Stocktaking-571099