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The Time Is Right for Expanding the Use of the IMF’s Precautionary Credit Lines

Many emerging economies could benefit from insurance against this backdrop of volatility. Fortunately, cheap and no-strings-attached liquidity insurance exists, in the form of the IMF’s Flexible Credit Line (FCL) for countries with very strong policy fundamentals; for countries with somewhat weaker, but still sound fundamentals, the Precautionary and Liquidity Line (PLL) offers a similarly good deal. But these precautionary instruments remain underutilized. We have some suggestions on how the IMF could fix this.