Regional Financial Arrangements in the Global Financial Safety Net: The Arab Monetary Fund and the Eurasian Fund for Stabilization and Development

Since the Global Financial Crisis of 2008, the volume and volatility of global capital flows have increased. Changes in transnational financial flows have, in turn, triggered substantial changes in the nature, size and use of the existing system of financial institutions and conventions that govern these international financial flows and oversee stability. This system, the Global Financial Safety Net (GFSN), provides backdrop insurance during financial crises. Its three elements – the International Monetary Fund (IMF), regional financial agreements (RFAs) and bilateral swap agreements – were subject to these changes after the Global Financial Crisis.

A journal article by Barbara Fitz and Laurissa Mühlich in the Journal of Development and Change investigates how changes in the GFSN have influenced its use and the role that RFA’s play in the safety net. The authors examine the timeliness, volume and policy conditionality of liquidity provision of each of the three elements of the GFSN, using a data set of 50 RFA member countries from the period 1976 to 2015. Using case studies of the Arab Monetary Fund (AMF) and the Eurasian Fund for Stabilization and Development (EFSD), the article contributes to a deeper institutional understanding of the governance mechanisms of regional funds.

Ultimately, the authors determine that today’s GFSN  produces inequalities in emergency liquidity provision, with RFAs improving the safety net for only small member countries. The experiences of the AMF and the EFSD demonstrate that intra-regional asymmetries of RFAs play a contradictory role: while the participation of large economies leverages liquidity provision, it simultaneously creates difficulties for the governance of the regional body. This increased fragmentation and de-institutionalization  can further fuel global inequalities in financial stability provision.