225 ECONOMIC ANALYSIS & POLICY, VOL. 41 NO. 2, SEPTEMBER 2011 New IMF Lending Facilities and Financial Stability in Emerging Markets Jari John Martin Luther University Halle-Wittenberg, Universitätsplatz 10, 06108 Halle (Saale), Germany (Email: jarijohn@arcor.de) and Tobias Knedlik 1 Halle Institute for Economic Research, Kleine Märkerstraße 8, 06108 Halle (Saale), Germany (Email: tobias.knedlik@iwh-halle.de) Abstract: In the light of the current global financial and economic crisis, the International Monetary Fund (IMF) has undertaken some major reforms of its lending facilities. The new Flexible Credit Line and the High Access Precautionary Arrangements differ from what has been in place so far, by allowing for ex ante conditionality. This paper summarizes preconditions for effective last resort lending and evaluates the newly introduced measures, concluding that the Flexible Credit Line comes very close to what has been called an International Lender of Last Resort. The main obstacles are the low demand and slow progress in complementary reforms. I. InTRoduCTIon In the wake of the recent global financial and economic crisis, the International Monetary Fund (IMF) has regained its central role in global financial crisis management. Currently 52 credit arrangements were made, of which 33 were negotiated after the crash of Lehman Brothers. Thus, in the recent crisis, the demand for IMF support has exceeded even that for its support during the Asian Crisis, when 21 arrangements were made. Moreover, the G20 Summit of April 2009 has made the resurrection of the IMF’s role a high-profile matter, when the G20 announced that the IMF’s liquidity would triple to $750 billion, by means of a one-time allocation of Special drawing Rights (SdRs) within the framework of the new Arrangements to Borrow. 1 Corresponding author: tobias.knedlik@iwh-halle.de