World Business

IDB stresses importance of emergency loans to prevent crises

(Xinhua)
Updated: 2010-04-07 15:25

SANTIAGO: The Inter-American Development Bank (IDB) Tuesday proposed a financial mechanism of emergency loans to prevent future financial crises in the emerging economies to the International Monetary Fund (IMF) and multilateral institutions.

Also on Tuesday, the IDB published a study entitled "The Impacts of the Crisis: Political Lessons and Coming Challenges for Latin America and the Caribbean." The study shows that the disposition of the international community to give emergency loans played an important role in preventing the financial crisis from spreading in the region.

The IDB said in its conclusion that in order to avoid future financial crises, the emerging economies need to have an "international loaner" to quickly give liquidity in case of crisis, and ensure that the solvent countries are not being affected by financial difficulties.

During the recent world economic crisis, the Latin American countries avoided monetary crises and external debts, as well as bank problems, which were typical during the crisis.

"During the period of extreme lack of liquidity in the international capital market, the opportunity of having access to the emergency resources is something highly valuable," IBD Vice President Santiago Levy said.

"This is one of the most important lessons that we have learnt from the recent world economic crisis," Levy added.

Compared with other crises, from the outset of this crisis, the international financial community gave unconditional, preventive and considerable aid to the emerging economies on time, Levy said.