如何建設(shè)更加公平與包容的全球金融安全網(wǎng)-How To Build a More Equitable and Inclusive Global Financial Safety Net

HOWTOBuildaMoreEquitableand

InclusiveGlobalFinancialsafetyNet?

Mingzhang,seniorFellowandDeputyDirector,InstituteofFinance&Banking,chineseAcademyofsocialsciences(china)yinmochen,Assistantprofessor,BusinessschoolofBeijingLanguageandcultureuniversity(china)

Migueloterolglesias,seniorAnalyst,ElcanoRoyalInstituteandprofessorofInternationalpoliticalEconomyatIEuniversity(spain)

Abstract

Thefrequentbreakoutsofinternationalfinancialcrisesrequiretheestablishmentofaglobalfinancialsafetynet.ThecurrentglobalfinancialsafetynetincludestheIMF,regionalfinancingarrangements,bilateralswapagreements,andforeignexchangereservesofvariouscountries.AftertheburstoftheglobalfinancialcrisisandCOVID-19pandemic,thecurrentsafetynetfacesthethreatoffragmentation.Tomeetthenumerouschallengesahead,weproposetobuildamoreequitableandinclusiveglobalfinancialsafetynetdesignatedtoprovidefinancialassistanceforcountriesinneed.Ourpolicysuggestionsinclude:(1)boostingthereformoftheIMF'sfundingsourcesandquotas,andconsolidatingtheIMF'spivotpositionintheglobalfinancialsafetynet.(2)broadeningthecoverageandenhancingtheroleofregionalfinancialarrangements.(3)usingtheIMFasaplatformtostrengthencollaborationbetweendifferentlevels.(4)preventingnewrisksgeneratedbynew(sovereign)digitalcurrencies.

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TheChallenge

Withglobaleconomicuncertaintiesrisingandinternationalfinancialcrisesbreakingoutfrequently,itisofgreatsignificancetostrengthentheGlobalFinancialSafetyNet(GFSN).ThecurrentGFSNincludesfourparts:thefirstisforeignexchangereservesatthenationallevel;thesecondisbilateralswapagreements(BSAs)betweencountries;thethirdisregionalfinancingagreements(RFAs);andthefourthistheIMFatthemultilaterallevel.

ThecurrentGFSNismorefragmentedthaninthepast,andindividualcountriesandregionshaveaccesstodifferentsizesandtypesoffinancialassistance(Denbeeetal2016).ThecurrentGFSNcannotguaranteethestabilityoftheglobalfinancialsystem,norcanitcopewithsystemicfinancialrisks,especiallyaftertheexperiencesoftheglobalfinancialcrisisandtheCOVID-19epidemic.ThecurrentGFSNismoreofasuboptimalpatchworkthanasystematicdesign(Shafik,2015),anditsstructureisfacingthefollowingfivechallenges.

First,accumulatingforeignexchangereservesisinefficient,andtheriskofbeingsanctionedbypowerfulcountriesliketheUSisgraduallyrising.Nonetheless,individualcountries’foreignexchangereservesremainthelargestcomponentoftheGFSN.

However,reserveaccumulationbringsseveralproblems.First,thecostofholdingreservesishigh,andthereturnfromitislow.Mostofreserveassetsarelow-yield,low-riskforeigngovernmentbonds,andtheyareexposedtobothvaluationandforeignexchangerisks.Forexample,from2022to2023,theFederalReserveraisedinterestrates13timesinarow,causingasharppricedeclineinU.S.Treasurybonds.Emergingmarketcountries(EMEs),whichinvestalargeproportionofforeignexchangereservesinU.S.Treasurybonds,sufferedlargevaluationlosses.Second,foreignexchangereservesare

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distributedveryunevenlyacrossdifferentregions.Moreover,onsomeoccasions,eventhosecountrieswithabundantreservesarereluctanttousethemtointerveneintheforeignexchangemarket.Forexample,duringtheglobalfinancialcrisis,nineofthelargestemergingmarketeconomiesrefrainedentirelyfromusingtheirreserves(Shafik,2015).Themajorreasonwasthatthoseeconomiesdeemedforeignexchangereservesasthemostimportantself-insurancetool,andtheywerereluctanttousethesereservesunlessabsolutelycompelled.Third,theriskofsanctionhasincreased.AftertheoutbreakoftheRussia-Ukraineconflict,theUnitedStateshasfrozentheRussianCentralBank’sforeignreserveassets.Afterthat,otherEMEsbegantoworryaboutthesafetyoftheirownoverseasassets.Asaresult,EMEshavebeguntoreducetheirinvestmentsinU.S.Treasurybondsandincreasetheirholdingsofgold.

Second,theFederalReserveswaplinesmayoccupythecorepositionoftheGFSN,replacingtheIMFandotherregionalfinancialarrangements.DuringtheUSsubprimecrisisandEuropeansovereigndebtcrisis,theFedconveyeddollarsthroughbilateralUSdollarswapsinordertoalleviatefundingliquidityshortagesintheoffshoredollarmarket.ThesenewestablishedbilateralFederalReserveswaplinesprovidedtimelyliquiditysupport,helpingstabilizeglobalfinancialmarketsandcross-bordercapitalflows,avoidingafull-blowndollarfundingcrisis.Wehadasimilarstoryduringthe2020pandemic.Theseepisodeshighlightedtheimportanceofaninternationallenderoflastresort(Carstens,2021).However,onlyafewcountriesbenefitedfromtheseswaplines(McCauleyandSchenk,2020).Fedcurrencyswapsareexclusive,affectingonlydevelopedcountrieswithcloseeconomic,trade,financialandmilitaryrelationstotheUS,liketheECB,BankofEngland,BankofJapanandBankofCanada.AmongtheEMEs,onlyBrazilandMexicohadtheopportunitytoestablishacurrencyswapagreementwiththeUnitedStates.MajorEMEssuchasChinaandIndiacannotparticipate

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init(ZhangandChen,2023),whichisproblematic.AlthoughtheEuropeanCentralBank(ECB)andthePeople'sBankofChinaarealsoestablishingcurrencyswaps,theyarenotaseffectiveastheFedcurrencyswapinsolvingliquidityshortages.Forexample,aftertheoutbreakoftheEuropeandebtcrisis,alargeamountoffundsflowedfromfinanciallyfragilememberstatestorelativelystablememberstates.Thebalanceofpaymentsofeachmemberstatebecameseriouslypolarized.Commercialbankshadtoturntotheirnationalcentralbankstomakeupforthegapincross-borderfundsettlement.ThisresultedinarapidexpansionofimbalancesintheECB'sclearingsystem.Although,itisalsotruethatTarget2helpedtocontainthecrisis.Thus,inthefuture,weneedaresilientglobalfinancialsafetynetthatdoesnotrelysolelyontheFederalReserve(Carstens,2021).

Third,Regionalfinancingarrangementslacktheabilitytoconductasoundandcomprehensivemacro-economicandmacro-prudentialsupervision.TheoccurrenceofmajorinternationalfinancialcrisesalwayspromptstheestablishmentanddevelopmentofRFAs.However,oncethecrisishaspassed,thedevelopmentoftheseRFAsslowsdown.ComparedwiththeEuropeanStabilityMechanism,theChiangMaiInitiativeMultilateralisation(CMIM)processfacesthefollowingproblems.First,theCMIM'sfundingisinsufficient,anditsoperationefficiencyislow.Moreover,theCMIMloanmainlyfocusesonshort-termfinancingneeds,andtheloanmaturityisrelativelyshort(AsianDevelopmentBank,2019).Second,limitedbytheinsufficientsupervisioncapacityandinordertoavoidmoralhazard,theCMIMrequiresthatwhenthefinancingexceedsacertainproportion,theborrowingcountrymustabidebytheIMFloanconditionalities.Third,duetothedistrustbetweencountriesintheregion,itisdifficulttodevelopatrulysufficientandindependentregionalfinancialsafetynetwork(Gaoetal2024).

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Fourth,TheIMFfacesseriousproblemsinthefieldsoffundingscale,resourcecomposition,andquotaallocation,whichweakenitscorepositioninthecurrentGFSN.(1)TheIMF’scurrentloancapacityisinsufficienttodealwithglobalsystemicfinancialcrises.(2)TheproportionofIMFquota-basedpermanentfundingtooverallfundingistoolow.Inotherwords,IMFloansrelyheavilyontemporaryfundingsources,whichwillhurttheIMF’slegitimacyinthelongrun.(3)ThecurrentstatusandpowerofemergingmarketsanddevelopingcountriesarenotfullyreflectedintheIMFgovernancestructure.ThevotingpoweroftheIMFdependsonthequotaofthememberstates,andthequotasofsomelargeemergingmarketsanddevelopingcountriesaresignificantlyunrepresented(Gao,2023).(4)TheIMF’sloanconditionalpoliciesarerelativelystringent.In2009,IMFBoardapprovedamajoroverhaultotheFund’slendingframeworkbymodernizingIMFconditionality,introducinganewflexiblecreditline,enhancingtheflexibilityoftheFund’sregularstand-bylendingarrangement,doublingaccesslimits,adaptingandsimplifyingcostandmaturitystructuresforitslending,andeliminatingfacilitiesthatwereseldomused.However,conditionalitypoliciesstilllimittheloanavailabilityofborrowingcountries.

Fifth,CentralBankDigitalCurrencies(CBDCs)couldbringunprecedentedriskstotheGFSN.Withoutappropriatesafeguards,especiallyforcountrieswithopencapitalaccounts,capitalflowsfacilitatedbyCBDCmayleadtoanincreasingdemandforGFSNresourcesbyintroducingnewshocksoramplifyingexistingshocksviacurrencysubstitution,exchangeratedepreciation,andbankruns.Inturn,thisnewphenomenoncouldinstigatepolicymakerstoexpandtheGFSNasawaytomitigateshocks.Finally,evenifitisimproved,theGFSNmayincreaseinsizebutbecomemoreunevenandfragmented(Kimetal,2024).

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TheG20’sRole

TheG20playsakeyroleinpromotingpoliticalconsensusamongtheworld'slargesteconomiesandshouldbecommittedtoconsolidatingtheG20’scoreroleinglobalfinancialgovernance.MembersoftheG20hold81%oftheIMF’squotasand78%ofitsvotingrights.Sincetheglobalfinancialcrisisin2008,theG20hasplayedanactiveroleinpromotingIMFquotareform(Gao,2023).

The“G20NewDelhiLeaders'Declaration”issuedattheG20SummitinSeptember2023reiteratedtheimportanceofestablishingastrong,quota-basedandadequatelyresourcedIMF.Infuturereforms,theG20willcontinuetoguidetheagendaofIMFquotareform.TheG20welcomesdiscussionsonthepotentialmacro-financialimplicationsarisingfromtheintroductionandadoptionofCentralBankDigitalCurrencies(CBDCs),notablyoncross-borderpaymentsaswellasontheinternationalmonetaryandfinancialsystem(G20,2023).

TheG20shouldprovideacooperationplatformforpromotingthecooperationofglobalfinancialsecuritynetworksatdifferentlevels.DrivenbytheG20,globalmacroeconomicpolicycooperationhasgraduallystrengthened.TheG20FinanceMinistersandthePresidentsoftheCentralBanks,andtheG20summitaregraduallyroutineandmechanized.TheG20isroutinelypromotingthereformofinstitutionsdominatedbytheIMF.Forsometimetocome,theG20shouldbecommittedtoleadingtheglobalfinancialgovernancereformalongtherighttrack.Forthis,theG20shouldcontinuetopromotethereformofinternationalfinancialinstitutionsandbuildamoreequitableandinclusiveGFSNtoavoidtherisksoffragmentation.

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RecommendationtotheG20

InordertobuildamoreequitableandinclusiveGFSN,thecoordinationamongtheglobalstandard-settingbodies,regulators,centralbanks,andmultilateralandrelevantprivate-sectorinstitutionswillbecritical(Kimetal,2024).Toachievethis,certainactionsarenecessary:

1.PromotingIMFreform.

TheG20shouldbecommittedtopromotingtheIMFasthecoreoftheglobalfinancialsafetynetandplayingthekeyroleinrespondingtointernationalfinancialcrisis.First,theG20shouldencouragetheIMFtoincreasecapital,reformquotas,issuemorespecialdrawingrightsandexpandthescopeofitsuse.Second,theG20shouldcontinuetoincreasetheproportionofofficialsandscholarsfromEMEswhoserveasseniorofficialsoftheIMF,sothatitcanmorefullyreflectthevoicesanddemandsofEMEs(ChenandZhang,2021).Third,theG20shouldencouragetheIMFtodirectdebtrestructuringandreliefinitiativesaimedatbuildingabroadersovereigndebtrestructuringsystem,andtoreformtheemergencyfinancingmechanismfromaprocyclicaltocountercyclicalbasedarrangement(GallagherandGao,2021).Asproposedby

Alfaroetal

(2024),itshouldalsoconsidertheestablishmentofanEmergingMarketsFund(EMF),inspiredbytheECBsTransmissionProtectionMechanism,andabletoprovideliquidityinsystemiccrises.Fourth,theG20shouldencouragetheIMFtoreformloanconditionalitypoliciesandeveninexceptionalcases,unconditionalloansshouldbeprovided,sothatmorecountriescanreceiveassistance.

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2.Strengtheningandimprovingregionalmonetarycooperationarrangements

InAsia,theG20shouldcontinuetopromotetheCMIMreforminordertoimproveitspracticabilityandeffectiveness.Inordertomakeupforthegapbetweenthesupplyanddemandofregionalliquidityfunds,enhancethelevelofregionalfinancialintegration,andimprovethemulti-levelglobalfinancialsafetynet,itisnecessaryforCMIMtobeupgradedfromthecurrentstagetoaregionalmonetaryfund.However,theconstructionofaregionalmonetaryfundneedstofollowacertainpath.Basedonthefollowingcriteria:themeasurementofthefund’sscale,thedesignofloaninstruments,theinstitutionalconstructionofgovernanceandeconomicsurveillancefunctions,andtheexplorationofhigher-levelregionalmonetarycooperationarethekeystodeterminingthefeasibilityofregionalmonetaryfunds(Gaoetal,2024).Thus,otherRFAsshouldcarrysimilarreforms.Inthisway,theG20couldcreateastrongandmorereliableglobalfinancialsafetynetbystitchingtogetheritsfragmentedregionalnetworks(G20,2018).Inaddition,theG20shouldbecommittedtopromotingthecollaborationofcurrencyswapnetworksatdifferentlevels.

3.GuardagainstnewrisksbroughtbyCBDCs.

Inanincreasinglydigitalworld,itisimportanttoimprovethecoordinationroleoftheG20amongalllayersoftheGFSNtomaximizeitsefficiency.Atthenationallevel,apotentialshifttoamultipolarreserveconfigurationmayrequireglobalreservecurrencyissuerstosubstantiallyexpandliquiditybackstoppingmechanismstominimizetheriskofdisorderlyswitchingbetweenreservecurrenciesandimproveaccesstoGFSNresources.Atthesametime,countrieswithopencapitalaccountsshouldpaymoreattentiontothepotentialcapitalflowrisksbroughtbydigitalcurrencies.Atthebilateralandregionallevel,weshouldexpandBSAsandRFAstoareasoutsidethedigitalcurrency

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blockandupgradethemintopreventivetoolstoguardagainstnewrisksposedbyCBDCsandotherdigitalcurrencieslikecryptoandstablecoins.Atthemultilaterallevel,weshouldpromotetheIMF’sfinancialsectortoassesspotentialrisksarisingfromDM.EffortswillbeneededtodevelopDMtaxonomies,monitortrends,identifykeyrisks,andgiveadviceondesignissuestomitigaterisks,aswellastoprovideaplatformforglobaldialogueandcooperation

(Otero-Iglesiasetal,2023)

.TheIMFshouldhelpcountrieswithweakcapacitytoavoidadigitaldivideandensurethatnewsolutionsworkforallcountries(Kimetal,2024).InamoreDM-drivenworld,theG20shouldurgetheIMFtoreassessitssizeandlendingtoolkittoensurethattheFundhasadequateresourcestoprovideitsmemberstateswithenoughfinancialassistance.

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References

AgustínCarstens,RethinkingtheGlobalFinancialSafetyNet,GeneralManageroftheBIS,SixthHigh-LevelRegionalFinancingArrangements(RFA)Dialogue,12October2021.

/speeches/sp211012a.htm

Alfaro,Lauraetal.“ReformingtheIMF:ANewInstrumentofInternationalLiquidityProvisionforEmergingMarketsandDevelopingEconomies(EMDEs)”,ElcanoRoyal

Institute,28February2024.

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the-imf-a-new-instrument-of-international-liquidity-provision-for-emerging-markets-

and-developing-economies-emdes/

AsianDevelopmentBank,StrengtheningRegionalSurveillanceandFinancialSafetyNetMechanismsinAsia:WorkshopHighlights,April2019,

/sites/default/files/publication/545021/strengthening-asia-financial

-safety-net.pdf

Denbee,Edward,CarstenJung,FrancescoPaternò,StitchingTogethertheGlobalFinancialSafetyNet.BankofItalyOccasionalPaper322(2016).

G20,G20NewDelhiLeaders’DeclarationNewDelhi,India,9-10September

2023,

https://www.g20.in/content/dam/gtwenty/gtwenty_