IMF: IMF advised countries to save foreign exchange reserves, said- they should be used judiciously

Posted on 15th Oct 2022 by rohit kumar

The IMF has urged countries to preserve vital foreign reserves amid the strengthening of the US dollar and weakening of other major currencies, including the Indian rupee. This is necessary to deal with potentially bad outflows and volatility in the future, according to the IMF.

 

In a blog post by Gita Gopinath, the IMF's first deputy managing director and the global lending body's chief economist, Pierre Olivier Gourinches, it is prudent to increase resilience in such a delicate environment. However, emerging market central banks have stockpiled dollars in recent years, reflecting lessons learned from earlier crises, he said. These buffers are limited and should be used judiciously.

 

The blog post said countries should preserve significant foreign reserves to deal with potentially worse outflows and upheavals in the future. Those who are able should restore swap lines with the central banks of advanced economies.

 

According to the Post, countries with sound economic policies where there is a need to address moderate vulnerabilities should actively take advantage of the precautionary lines of the International Monetary Fund to meet future liquidity needs.

 

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