Strengthening the financial instruments, Microeconomics

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Strengthening the Financial Instruments - rationale in era of globalisation:

With this in view, following suggestions can be made:

i) Finance must be conditioned on a policy framework strong enough and timely enough to restore confidence. An institution's resources cannot compensate for a lack of policy credibility, and lending official resources to fund an inadequate policy efforts may make the situation worse. 

ii) The scale of finance provided has to be calibrated to the needs, an the needs can we substantial in today's world. The BW institutions can only fill part of the gap, but there have to be able to fill a credible share of the gap if these have to play a successful part in catalysing other resources to flow. 

iii) Flexibility to structure programmes appropriate to the circumstances and the borrower's policy effort is essential. The BW institutions need to be able to substantially frontload financial packages, when this is warranted. Making available small trenches of resources over the life of a programme does little to address the realities of open emerging market economies facing liquidity problems. Rather than the classis staircase pattern of disbursements, the institutions should consider, in some cases, providing a larger up front trance that floats and is available it stress materialises and policy is responding appropriately.

iv) The BW institutions should stand ready to support countries in pursuing reasonable restructuring proposals when narrated by the circumstances. Official financial resources in that context an be helpful in meeting some targeted needs. 

v) The institutions need a more credible capacity to withstand arrears, so that these do not face the reality or the perception that these can be induced to accept weak programmes only to allow them to refinance their exposure.


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