The International Monetary Fund has decided to strengthen its lending tools to enhance provision of liquidity and emergency assistance to the member countries as the European debt crisis threatens to snowball into another global financial meltdown.

The Fund said Tuesday that its Precautionary Credit Line will be replaced with a more flexible Precautionary and Liquidity Line, which can be used as insurance against future shocks and as a short-term liquidity window to address the needs of crisis bystanders during times of heightened regional or global stress and break the chains of contagion.

The Fund's current instruments for emergency assistance, Emergency Natural Disaster Assistance and the Emergency Post-Conflict Assistance, will be consolidated under the Rapid Financing Instrument. This instrument may be used to support a full range of urgent balance of payments needs, including those arising from exogenous shocks, the IMF said.

According to the lender, these reforms will enable it to respond better to the diverse liquidity needs of members with sound policies and fundamentals, including those affected during periods of heightened economic or market stress.

IMF Managing Director Christine Lagarde said that the Fund has been asked to enhance its lending toolkit to help the membership cope with crises. "We have acted quickly, and the new tools will enable us to respond more rapidly and effectively for the benefit of the whole membership," she said.

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