imf's annual report 2007
TRANSCRIPT
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I n t e R n A t I o n A l M o n e t A R y F u n d
Aa Rpr 2007
Maki ba cm wrk r a
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th Iraia Mar F
t IMF is wr’s cra raizai r iraia
mar cprai i wic ams a cris i wrwrk r prm cmm . t IMF’s primar
prps is saar sabii iraia m-
ar ssm— ssm xca ras a iraia
pams a abs cris (a ir ciizs) b s
a srvics rm ac r. tis is ssia r acivi ss-
aiab cmic rw a raisi ivi saars.
A IMF’s 185 mmbr cris ar rprs is
exciv Bar, wic srvs as a rm wr ca is-
css aia, ria, a ba csqcs ir
cmic picis. tis Annual Report cvrs aciviis
exciv Bar a F maam a sa ri
acia ar Ma 1, 2006, r Apri 30, 2007.
t mai aciviis IMF ic
• prvii avic mmbrs api picis
a ca p m prv r rsv a acia crisis,
aciv macrcmic sabii, accra cmic
rw, a avia pvr;
• maki aci mprari avaiab mmbrcris p m arss baac pams
prbms—a is, w msvs sr
ri xca bcas ir pams r c-
ris xc ir ri xca aris; a
• ri cica assisac a raii cris a
ir rqs, p m bi xpris a isi-
is impm s cmic picis.
t IMF is aqarr i Wasi, dC, a, rfci is
ba rac a cs is wi is mmbrs, as as cs imr a 80 cris ar wr.
t IMF’s acia sams r ar Apri 30, 2007,
ca b Cd-RoM ax isi back cvr
is Report . Aiia irmai IMF a is mmbr
cris ca b F’s Wb si, www.im.org.
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This Annual Report o the Executive Board o the IMF to
the Board o Governors covers the nancial year 2007, which
began on May 1, 2006, and ended on April 30, 2007. Twoevents that occurred ater the close o FY2007 are o such
importance or the IMF, however, that they merit a mention
in this preace.
The rst is the Executive Board’s decision in June 2007 to
revise the Fund’s ramework or surveillance. In the three
decades since the original ramework was established by the
Executive Board in 1977, the nature o the challenges aced
by our members has changed. When the 1977 decision was
adopted, the most serious threats to international nancial and
macroeconomic stability were the manipulation o exchange
rates by countries seeking to correct their balance o paymentsproblems, and short-term exchange rate volatility. Today, in
our increasingly globalized world, as international trade and
cross-border capital fows reach unprecedented levels, the most
serious threats are undamental exchange rate misalignments
and capital account vulnerabilities. The new decision, which
has broad support across the membership, refects the current
environment and provides our members with clear guidelines on
the expectations o the international community regarding the
potential spillover eects o exchange rate policies, and provides
guidance to sta with a view to ocusing the Fund’s advice on
macroeconomic policies that promote stability and growth.
The second event is Managing Director Rodrigo de Rato’s
announcement that he would step down in October 2007.
On behal o the Executive Board, I oer my gratitude to Mr.
de Rato or his strong leadership and immense contributions
to the Fund since he took up the reins in 2005. I would note,
in particular, the Medium-Term Strategy launched in 2006,
an ambitious program calling or reorm o the distribution
o quotas and voting power in the Fund to ensure that all
members are airly and adequately represented, and setting
in motion important changes in Fund operations and policies
that will enable us to better meet the evolving needs o ourmembers. In the process o selecting Mr. de Rato’s successor,
Executive Directors have been invited to nominate candidates
who have distinguished records as economic policymakers
at senior levels and who are nationals o any o the Fund’s
185 member countries. The Executive Board will consider
these candidates in September.
Readers can nd inormation about these and other
developments ater the close o the nancial year at
www.im.org, the IMF’s Web site.
The Executive Board is rightly proud o this new ormat
o the IMF’s Annual Report. To shape it into a more eective
communication tool, the Executive Board decided to
streamline the Report and to have it translated into seven
languages—Arabic, Chinese, French, German, Japanese,
Russian, and Spanish—three more than in the past. Readers
will nd all o the appendixes—including the nancial
statements—that used to be in the print Report on the CD-ROM
axed to the inside back cover. On the CD-ROM, they will
also nd Public Inormation Notices, press releases, assorted
reports, and tables and boxes oering more detail on the
activities described in the print Report .
We trust that readers will welcome these changes, and we invite
your eedback.
Jonathan T. Fried
Chairman
Executive Board Committee on the Annual Report
Preace rom the Executive Board
IMF Aa Rpr | 2
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2
Contents
IMF Aa Rpr | 2007
Mssag rm h Maagig dircr 4
lr trasmia h Bar Gvrrs 6
1. ovrviw 7
K cmic a acia vpms 9
hiis wrk exciv Bar 12
Sri a mrizi srviac 13
Prram sppr 13
Capaci bii 14
Qa a vic rrm 15
Cmmicai a rasparc 15
Imprvi ira vrac 16
Rviwi acs F 16
2. prmig facia a macrcmic
sabii a grwh hrgh srviac 17Impmi srviac 20
gba srviac 20
Cr srviac 23
Ria srviac a rac 23
Fiacia scr srviac a
Saars a Cs Iiiaiv 25
Mrizi srviac ramwrk
a irai acia scr aasis 27
Irai acia scr a capia
marks aasis i srviac 29
3. prgram sr 31
emri mark cmis 36
li 36
nw aci isrm 37
lw-icm cris 37
Ccssia i 37
db ri 38
db Ssaiabii Framwrk 40
Pic Sppr Isrm 41
emrc assisac 42
Rviw IMF’s r a isrms 42
IMF a ai sb-Saara Arica 42
ex ps assssms 44
Prcaiar arrams 44
4. Caaci biig: chica assisac
a raiig 45
tcica assisac 47
traii b IMF Isi 52
5. Gvrac, rgaizai, a facs 53
Qa a vic rrm 54
Cmmicai a rasparc 56
Cmmicai 56
trasparc pic 59
Maam a raizai 60
hw IMF is r 60
Amiisraiv a capia bs 63
Mrizi risk-maam
ramwrk 64
Sramii 65
Fiacia prais a picis 65
Icm, cars, rmrai,
a br sari 65
Arrars IMF 67
IMF ai mcaisms 67
exciv dircrs a Aras
Ari 30, 2007 68
Sir fcrs Ari 30, 2007 70
IMF rgaizai char 71
Acrms a abbrviais 72Cd-RoM
The ollowing are included on the CD-ROM axed to the
inside back cover o this Rpr:
tx Annual Report 2007 (eis, Frc, Spais)
Sppmar marias r x caprs (eis)
Appixs (eis)
Appix I Iraia Rsrvs
Appix II Fiacia prais a rasacis
Appix III Prss cmmiqés IMFC a
dvpm Cmmi
Appix IV exciv dircrs a vi pwr Appix V Cas i mmbrsip
exciv Bar
Appix VI Fiacia sams
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Bxs
1.1 Prrss impmi
Mim-trm Sra 10
2.1 Srviac aciviis 192.2 Mar a Capia Marks dparm 20
2.3 RoSCs a daa Saars Iiiaivs 22
3.1 Spcia drawi Ris 33
3.2 tracki prrss war Miim
dvpm gas 39
3.3 tra ibraizai a w-icm cris 40
4.1 Ria tcica Assisac Crs 48
5.1 Iiiai tir gra
Rviw Qas 55
5.2 liais wi irvrma,
iraia, a ria raizais 58
5.3 Aciviis Ieo i Fy2007 59
5.4 Prrmac iicars 62
5.5 Saar assssms 64
5.6 Ivsm Acc 66
tabs
3.1 IMF i aciiis 34
3.2 PRgF arrams apprv i Fy2007 38
4.1 tcica assisac b cr icmrp, Fy2007 49
4.2 IMF cica assisac rsrcs
a ivr, Fy2005–07 49
4.3 drs IMF’s cica
assisac prram 50
5.1 Amiisraiv bs, Fy2005–08 62
5.2 Arrars IMF cris wi
biais vr b six ms r
mr, b p 65
Figrs
1.1 Ra gdP rw 9
1.2 Crr acc baac 9
1.3 eqi mark prrmac 12
1.4 Svri spras 12
3.1 Rar as sai, Fy1997–Fy2007 36
3.2 Ccssia as sai,
Fy1997–Fy2007 38
5.1 esima rss amiisraiv xpirs
b k p aras, Fy2007 62
5.2 esima rss amiisraiv xpirs
b k p aras, Fy2008 63
t IMF’s acia ar is Ma 1 r Apri 30.
t i acc IMF is Spcia drawi Ri (SdR); cvrsis IMF acia aa u.S. arsar apprxima a prvi r cvic. o Apri 30, 2007, SdR/u.S. ar xca ra was
uS$1 = SdR 0.65609, a u.S. ar/SdR xca ra was SdR 1 = uS$1.52418. t ar-arir ras
(Apri 30, 2006) wr uS$1 = SdR 0.67978 a SdR 1 = uS$1.47106.
“Bii” mas a sa mii; “rii” mas a sa bii; mir iscrpacis bw csi
rs a as ar ri.
As s i is Annual Report, rm “cr” s i a cass rr a rriria i a is a sa as
rs b iraia aw a pracic. As s r, rm as cvrs sm rriria iis a ar
sas b r wic saisica aa ar maiai a spara a ip basis.
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4
IMF Aa Rpr | 2007
This is a time o transormation, in the global economy and in
the International Monetary Fund. The sources o global growth
have broadened: Europe, Japan, and the United States have allenjoyed solid economic perormance over the past year, while
middle-income emerging economies, including China and
India, were also important contributors to global growth.
Innovation in nancial markets has continued, bringing with
it many opportunities and some new risks. In the Fund, work
on the reorms set out in the Medium-Term Strategy has
proceeded, and we saw its rst ruits in Financial Year 2007.
Some o the most important changes we have made in the past
year have been in our economic oversight unction, or surveillance,
which is the Fund’s core activity. The introduction o multilateral
consultations gives the Fund—and the international community—an important new tool to orge consensus on approaches to
common problems. The rst multilateral consultation, which
ocused on reducing global imbalances while sustaining strong
global growth, resulted in the ve participants—China, the euro
area, Japan, Saudi Arabia, and the United States—jointly setting
out their policy plans in a document circulated at our Spring
Meetings to ministers representing the Fund’s 185 members. The
participating countries putting orward these policies and
discussing them collaboratively shows their commitment to
multilateralism. As they are implemented, these policy plans will
reduce global imbalances while helping to sustain growth.
The Fund also made important progress in deepening its work on
nancial markets and nancial systems. We are better integrating
our work on nancial sectors with our work on macroeconomic
issues. And through the merger o two Fund departments into the
Monetary and Capital Markets Department in June 2006, we
have established a center o excellence in nancial market issues—
an area o growing importance to the global economy and to the
Fund’s members.
In FY2007 we also began work on reorms o the legal
ramework or bilateral surveillance, which culminated in
an Executive Board Decision on a New Framework orSurveillance early in FY2008. The new decision is the rst
major revision o the surveillance ramework in some 30 years,
and has broad support rom our membership. It refects
current best practice in our work o monitoring members’
exchange rate policies and domestic economic policies;
rearms that surveillance should be ocused on the Fund’s
core mandate—promoting countries’ external stability;
updates the principles or the guidance o members in the
conduct o their exchange rate policies; and sets out clearly
what is expected o surveil lance, including candor and
evenhandedness.
The Fund’s work with low-income countries has remained
intense. Ten new programs under the Poverty Reduction and
Growth Facility were approved last year, and 24 countries
have now beneted rom debt relie under the Multilateral
Debt Relie Initiative. We are also taking steps to ensure that
we are ocus ing on critical macroeconomic and nancial areas,
which is where we can make the greatest contribution to
stability, growth, and poverty reduction in low-income
countries. We will continue to work in partnership with the
World Bank and other development agencies, and in doing so
can now draw on an important report on Bank-Fund
collaboration by a committee o external experts headed by Pedro Malan. The Committee’s report, delivered in February
2007, will help us clariy roles and work better with our
World Bank colleagues.
Technical assistance and training remain important elements
o our work, especially in low-income countries. FY2007 saw
the opening o a regional technical assistance center in
Libreville, Gabon, the third in Arica, as well as the opening
Message rom the Managing Director
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o the Joint Indian-IMF Training Program in Pune, India, the
seventh regional training center worldwide. Meanwhile, the
consolidation o anti–money laundering and combating thenancing o terrorism (AML/CFT) activities in the Fund’s
Legal Department has made it the largest multilateral provider
o technical assistance on AML/CFT.
In January 2007, we received a report rom a Committee o
Eminent Persons chaired by Andrew Crockett. Arguing that the
Fund needs a new income model and that it should not continue
to rely almost entirely on lending to nance public goods such
as surveillance and technical assistance, the Crockett Report
recommended that the Fund broaden its sources o income.
Establishing reliable income sources—together with eective
management o expenditure—is important to give our memberscondence that the Fund will be able to carry out its mandate in
the uture and to enable us to make reliable plans to implement
agreed policies. We have already acted on expenditure: the
medium-term budget or FY2008–10 implies a reduction in the
IMF’s real administrative resources in each o the next three years,
to be achieved by increasing eciency and by scaling back or
eliminating lower-priority activities. Addressing the income side
o the equation will be a major priority or FY2008.
The September 2006 Annual Meetings were held in Singapore.
The meetings gave all o our members a chance to see how ar
Asia has come since the crisis a decade ago. They also saw theFund take a major step orward with the completion o the rst
stage o reorm o quotas and voice. On September 18, 2006,
our Board o Governors approved ad hoc quota increases or
our countries—China, Korea, Mexico, and Turkey—that were
clearly underrepresented and agreed on more undamental
reorms to be delivered within two years. This was a historic
agreement or the Fund. In January 2007, the Executive Board
began work on a proposed amendment to the Articles o
Agreement to increase basic votes, with the aim o protecting
the voting share o low-income countries as a group. And at its
meeting on April 14, 2007, the International Monetary andFinancial Committee (IMFC) gave us guidance on a new
ormula or broader changes in quotas. The IMFC agreed that
the new ormula should be simple and transparent, and
appropriately capture the relative positions o members in the
global economy. The reorm should also result in higher shares
or dynamic economies, many o which are emerging market
economies, whose weight and role in the global economy have
increased. Our objective remains to complete these reorms by
the 2007 Annual Meetings i possible, and by no later than the
2008 Annual Meetings. Meeting this target will require
leadership rom members, and compromises among them. But
i we can continue to draw on the spirit o multilateralcooperation that we saw in Singapore then I am condent that
we will succeed.
The past year has been a year o great change at the Fund, and
there are many changes still to come. There have also been
changes in sta and management. Anne Krueger, First Deputy
Managing Director rom 2001 to 2006, has been succeeded
by John Lipsky. Agustín Carstens, Deputy Managing Director
rom 2003 to 2006, has become Secretary o Finance o
Mexico and has been succeeded by Murilo Portugal. Among
the changes to come will be my own departure. I will step
down as Managing Director ater the 2007 Annual Meetings.
However, there are also important continuities: in the commit-
ment to the Fund o our members, represented by our excellent
Executive Board; in the dedicated career sta o the Fund; in
the work o the institution; and in our sense o vision and
purpose. I am proud to be have been able to help guide the
Fund during this time o change, and to have had the opportu-
nity to serve all o the members o this great institution.
Rodrigo de Rato, IMF Managing Director and Chair o the Executive Board
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6
IMF Aa Rpr | 2007
August 3, 2007
Dear Mr. Chairman:
I have the honor to present to the Board o Governors the Annual Report o the Executive Board or the nancial year ended
April 30, 2007, in accordance with Article XII, Section 7(a) o the Articles o Agreement o the International Monetary Fund
and Section 10 o the IMF’s By-Laws. In accordance with Section 20 o the By-Laws, the administrative and capital budgets o the
IMF approved by the Executive Board or the nancial year ending April 30, 2008, are presented in Chapter 5. The audited
nancial statements or the year ended April 30, 2007, o the General Department, the SDR Department, and the accounts
administered by the IMF, together with reports o the external audit rm thereon, are presented in Appendix VI. The external
audit and nancial reporting processes were overseen by the External Audit Committee, comprising Dr. Len Konar (Chair),
Mr. Satoshi Itoh, and Mr. Steve Anderson, as required under Section 20(c) o the Fund’s By-Laws.
Rodrigo de Rato
Managing Director and Chair o the Executive Board
Letter o Transmittalto the Board o Governors
The IMF Executive Board and senior management
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Chapter 1
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During the nancial year beginning on May 1, 2006, and ending on April 30, 2007, the Executive
Board ocused on adapting Fund policies and operations to better meet the evolving needs o the
IMF’s member countries, whose number increased to 185 in January 2007, when Montenegro
joined. Although many o the IMF’s members experienced another year o strong economic
growth and avorable market conditions, the economic and nancial environment was not with-
out risk. Large global imbalances persisted, the U.S. economy slowed, prices or oil and nonuel
commodities remained high, and investors continued to show a large appetite or risky assets.
The IMF made considerable progress in implementing the objectives set out in the Medium-Term
Strategy (MTS) launched by the Managing Director in FY2006 (Box 1.1). With capital fows to
emerging market economies reaching unprecedented levels in recent years, and demand or Fund
lending declining as a result, the IMF has been increasingly concentrating on surveillance,1 policy
advice, and technical assistance. During FY2007, it developed a new surveillance vehicle—the
multilateral consultation—with which it sought to help its members address the problem o global
imbalances. It also began a review o its ramework or surveillance and moved to better integrate
nancial sector work into its surveillance activities to help members manage the risks associated
with, and reap the benets rom, globalized nancial markets.
In recognition o the growing economic weight o some Fund members, the Executive Board
undertook quota and governance-related reorms designed to ensure the air distribution o quotas
and adequate representation o all members. The Board also took steps to improve the Fund’s
internal governance, enhance the eciency o Fund operations, and develop a new income modelmore closely aligned with the variety o unctions the institution now perorms.
Chapter 1 Overview
1 The monitoring o global, regional, and national economic policies; see Box 2.1.
IMF Aa Rpr | 2007
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ovrviw | 1
Key Economic and Financial Developments
Global economic growth accelerated to 5.4 percent in 2006—
up rom 4.9 percent in 2005—marking the ourth successive
year o a strong global expansion (Figure 1.1). Moreover, theexpansion became better balanced, as a slowing in the U.S.
economy was oset by rming o growth elsewhere. Emerging
market countries grew particularly ast, supported by benign
international nancial conditions and, in many cases, high
commodity prices. Infation in the advanced economies
declined in the second hal o 2006 as oil prices ell rom a
peak in August.
Current account imbalances continued to be large (Figure 1.2).
The external decit o the United States stabilized at 6½ percent
o GDP in 2006, with a marked narrowing toward the end o
the year. The surpluses o the oil-exporting and East Asian
countries continued to rise, while decits grew in both western
and emerging Europe2 and in rapidly growing emerging market
economies such as India.
Growth in the United States slowed markedly, declining rom
an annual rate o 2½ percent in the second hal o 2006 to
0.6 percent in the rst quarter o 2007, primarily because o
declines in net exports, inventories, and residential investment. Although export growth remained solid, aster import growth
reversed some o the improvement that had been made in the
trade balance ater August 2006. Rising oil imports accounted
or more than hal o the increase in imports. Business invest-
ment also slowed. However, private consumption remained
solid, supported by continued employment growth and rising
equity prices.
Economic activity in the euro area gained momentum during
the same period. GDP growth reached 2½ percent (seasonally
adjusted annual rate) in the rst quarter o 2007, almost double
the pace in 2005 and the highest rate since 2000, driven by strong investment and net exports, while consumption spending
slowed signicantly, refecting in part the impact o the increase
in the German value-added tax.
Japan’s economic expansion hit a sot patch in the middle o
2006, mainly because o an unexpected decline in consump-
tion, but growth rebounded strongly in the ourth quarter
o 2006 as domestic demand regained momentum. The pace
o activity moderated in early 2007, but growth remained
above potential.
Activity in emerging Asia continued to expand briskly, led by strong growth in China and India. In China, real GDP grew by
10.7 percent in 2006. The pace o xed-asset investment cooled
in the second hal o 2006 but gathered pace again in early
2007. India’s growth o 9.7 percent in 2006 was supported by
strong consumption and, especially, investment. In the newly
industrialized economies (Korea, Taiwan Province o China,
Hong Kong SAR, and Singapore), resilient external demand
supported activity, notably in the electronics sector. GDP
growth also increased in the ASEAN-4 economies (Indonesia,
Malaysia, the Philippines, and Thailand).
Growth in Latin America accelerated to 5.5 percent in 2006rom 4.6 percent in 2005, bringing the average growth rate or
the past three years to 5¼ percent, the best perormance since
the late 1970s. Growth picked up in Brazil and Mexico,
although it remained below the regional average. As Latin
America’s recovery matured, domestic demand became the
main engine o growth. Net exports exerted a downward pull
2 As used in Fund publications, this term includes Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, the Slovak Republic, and Turkey.
Figure 1.1 Real GDP growth
(In percent change rom a year earlier)
Wr ui Avac dvpi emri las Sb-SaaraSas cris Asia mark vp Arica
(xcp u.S.) cris cris(xcp Asia)
109
8
7
6
5
4
3
2
1
0
2004 20062005
Figure 1.2 Current account balance
(In percent o world GDP)
F xprrs
ui Sas
Japa
er ara
dvpi Asia
1.0
0.5
0.0
–0.5
–1.0
–1.5
–2.095 96 97 98 99 00 01 02 03 04 05 06
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Box 1.1 Progress on implementing the Medium-Term Strategy
IMF Aa Rpr | 2007
10
objciv Aci
Srviac Mrizi ramwrk Rviw 1977 dcisi Srviac vr exca Ra
Picis a wrk a “rmi” (sam srviac pririis)
taki a miara prspciv
a sri acia scr
srviac
Firs miara csai; xpasi ria srviac;
rar aasis crss-cr spivrs; icras acia
scr cvra; rpr ask rc irai acia scr
wrk i srviac
Maki cr srviac sarpr
a mr cs
Srviac aas; xprimai wi srami
csais
emrgig marks
a crisis rvi
dpi acia scr a
capia mark srviac
dvpm a ramwrk r arssi acia scr isss
i cr srviac
Rassssi aqac
xisi isrms r crisis
prvi
Bar iscssis a rac vpm a w
ci aci isrm r iqii prbms as par
IMF’s crisis-prvi ki
lw-icm
cris
Sppri iraia
cmmi’s r p w-
icm cris aciv
Miim dvpm gas
Pic avic, ccssia i, b ri, a cica
assisac p w-icm cris aciv macrcmic
sabii a accra rw; racki prrss war
Miim dvpm gas ji wi Wr Bak
(Global Monitoring Report)
dpi ivvm i ai
wi ai fws
Pic avic civ s icras ai; wi p
rcmmais Ip evaai oc’s
rpr IMF’s avic a acis wi rspc ai fws
sb-Saara Arica
hpi cris a av
rciv b ri avi racc-
mai ssaiab b
Imprvms i db Ssaiabii Framwrk a rar
rac; cica assisac imprvi pbic b maa-
m pracics a aci saisica capaci
Caaci biig Bsri capaci bii i
vpi cris; br
irai cica assisac araii wi srviac i
accrac wi cr pririis
Impmi MtS r capaci bii; irai cr
s a cica assisac rsrcs wi IMF’s b
prcss; wrki cs wi r parrs vra irarsrcs r capaci bii; xpai ria cica
assisac a raii aciviis, ici wi pi
ir ria cica assisac cr i Arica ( six
wrwi), a a w ria raii cr i Iia (
sv wrwi)
Qa a vic
rrm
Rirci IMF civss a
iimac r prrss
qa a vic rrm
A c qa icrass r r car rrprs
cris—Cia, Kra, Mxic, a trk; csirai
pricips r w qa rma; iscssi a ram-
wrk r icrasi basic vs; icrasi sa rsrcs r
exciv dircrs c b a ar mbr mmbrs
Gvrac a
maagm
Sri cmmicai a
rasparc
Bii rviw cmmicai sra; ras sc
rasparc aa rpr
Maki IMF mr cs-civ
a ci
Csirai rcmmais xra cmmi rpr
Bak-F cabrai; impmai p-rib ramwrk wi ra rci i rsrcs vr
mim rm; imprv risk-maam ramwrk; srami-
i prcrs
Pi IMF’s acs a
ssaiab i
Rpr IMF’s icm m b Cmmi
emi Prss
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ovrviw | 1
on activity, partly as a consequence o weaker growth in the
United States, the region’s largest trading partner, although
commodity exporters continued to benet rom buoyant world
commodity prices.
In emerging Europe, growth accelerated to 6 percent in 2006.
Domestic demand increased as consumption was boosted by
rising employment and real wages. Current account decits
widened urther but, in most cases, were nanced without
diculty by bank infows and oreign direct investment.
However, concerns about large external decits in Hungary
and Turkey led to downward pressure on the exchange rates or
those two countries, and policies were tightened. Activity in the
Commonwealth o Independent States, the group ormed by 12
o the ormer Soviet republics, also continued to expand briskly,
supported by high prices or oil and non-oil commodities.
Middle Eastern oil exporters enjoyed another year o solid
growth in 2006, accompanied by strong external and scal
balances. Oil revenues continued to grow rapidly, the strong
momentum o the non-oil sector continued, and governments
planned large expenditures on social programs and investment
in the oil and non-oil sectors.
Growth in sub-Saharan Arica moderated somewhat in 2006
but remained robust, driven increasingly by domestic invest-
ment, rising productivity, and, to a lesser degree, government
consumption. Higher oil revenues and debt relie supportedgovernment spending in many countries. Infation remained
subdued or most, owing to prudent macroeconomic policies
and another good harvest.
Oil prices continued to be high and volatile. Ater reaching a
record high o $76 a barrel in August 2006, the average
petroleum spot price declined in subsequent months, refecting
a combination o slowing demand in industrial countries, a
recovery o non-OPEC supply, and some easing o geopolitical
tensions. However, OPEC’s production cuts ater November
and a recovery in demand in the rst quarter o 2007 caused
prices to rebound. Renewed geopolitical tensions in the MiddleEast pushed prices up even urther in March and April o 2007,
to $65 a barrel by the end o April. Prices o nonuel commodities,
led by metals, also rose sharply during the second hal o 2006
and the rst our months o 2007, as did prices o some
agricultural commodities—notably corn—refecting, in part,
the prospect o growing demand or biouels.
The monetary policies adopted by IMF member countries
refected dierent cyclical positions. The U.S. Federal Reserve
kept the Fed unds rate on hold rom June 2006 on, balancing
the risks o a cooling economy against continued concerns about
infation. With infation in Japan continuing to hover around
zero, the Bank o Japan raised its policy rate to 0.5 percent in two
quarter-point moves, ater abandoning its zero interest rate policy
in July 2006. By contrast, the European Central Bank and
European national central banks steadily tightened monetary
policy. Some emerging market countries—notably China, India,
and Turkey—also tightened monetary conditions, China and
Turkey because o concerns about overly rapid growth, India
because o concerns about infationary pressures. Turkey was alsoresponding to external pressures. Regarding scal policies,
industrial countries made some progress in reducing structural
decits, largely as a result o unusually strong revenue growth.
Nonetheless, with their aging populations, these countries will
need to make urther substantial adjustments going orward to
achieve scal sustainability.
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In emerging markets,3 yield spreads declined to new historical
lows (Figure 1.4). The market was supported by continued
improvements in credit quality (with rating upgrades ar
exceeding downgrades), more sovereign debt buybacks (and,in the process, the continued reduction o the stock o Brady
bonds), and reduced sovereign issuance. Global investors
increased their portolio allocations in local emerging markets.
Net fows to emerging equity markets fuctuated. In particu-
lar, sharp outfows were recorded during the corrections o
May/June 2006 and February/March 2007, with the largest
outfows experienced in those markets that had run up the
most. Nonetheless, emerging market equities produced strong
returns, with the MSCI local currency emerging market
equity index gaining 15.2 percent between May 1, 2006, and
end-April 2007.
In oreign exchange markets, slower growth in the United
States contributed to a weakening o the U.S. dollar. Between
May 2006 and the end o April 2007, the dollar depreciated
8.4 percent against the euro and 9.5 percent against theBritish pound. The yen also weakened urther, as low interest
rates continued to encourage capital outfows. The renminbi
depreciated slightly in real eective terms, despite a mild
acceleration in its rate o nominal appreciation against the
U.S. dollar and a urther rise in China’s current account
surplus to 9½ percent o GDP in 2006. Overall, currency
market conditions remained orderly and volatility, low.
Financial market stability continued to be underpinned by
avorable global economic prospects. Despite bouts o
nervousness in May/June 2006 and again in February/March
2007, market volatility generally remained at low levels. Thelatter episode was triggered by a variety o actors against a
backdrop o growing concern about the impact o the rapidly
slowing U.S. housing market on housing-related securities, as
mortgage delinquencies and deault rates picked up, particularly
in loans to lower-quality (subprime) borrowers.
Corporate bond spreads remained low. Strong corporate balance
sheets, including ample cash cushions, supported a wave o
mergers and acquisitions. This activity, combined with higher-
than-expected corporate prots, contributed to double-digit
returns in most global equity markets, Japan being a notable
exception (Figure 1.3). During the IMF’s nancial year 2007,the S&P 500 gained 13.1 percent and the Eurorst 300 gained
13.9 percent, while the Topix lost 0.9 percent.
3 Emerging market economies are mainly developing countries that have advanced ar enough in capital market development to attract oreign portolio investment and/or borrow signicantly in international capital markets.
4 The Executive Board’s calendar and work program can be ound on the CD-ROM. General inormation on the Board’s responsibilities and activities can be ound in the IMF Handbook, also on the CD-ROM.
Figure 1.4 Sovereign spreads
(In basis points)
Source: JPMorgan Chase & Co.
Asia
300
250
200
150
100
Ma J J A Sp oc nv dc Ja Fb Mar Apr Ma
2006 2007
erpeMBI gba
lai Amrica
Figure 1.3 Equity market performance
(May 1, 2006 = 100)
Source: Bloomberg L.P.
S&P 500
120
110
100
90
80
Ma J J A Sp oc nv dc Ja Fb Mar Apr Ma
2006 2007
errs 300
MSCI emri Marks
tpix
Highlights o the Work o the Executive Board
The common thread running through the IMF’s activities in
FY2007 was the continued acceleration o globalization, the
greatest challenge acing both the IMF and its members in the
early twenty-rst century. With this challenge in mind, the
Executive Board made considerable progress toward key
objectives set orth in the Fund’s MTS: strengthening and
modernizing surveillance; seeking new ways to support
emerging market countries; deepening Fund engagement with
low-income countries; reorming governance and strengthening
internal management to make the Fund a more ecient and
eective institution; and placing the IMF’s nances on a
sustainable ooting.4
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Strengthening and modernizing surveillance
To serve the purposes o the IMF’s membership, surveillance
must be ocused, candid, transparent, evenhanded, and
accountable, and devote careul attention to cross-country
spillovers. In FY2007, the Executive Board took steps to
strengthen and modernize the ramework or surveillance.
It began a review o the 1977 Decision on Surveillance over
Exchange Rate Policies, the ramework adopted by the Board
in 1977 that has guided the IMF’s work in this area, to ensure
that it refects best practice and sets out a coherent vision o
the IMF’s core activity. In their review, Executive Directors
ound important areas o broad agreement, and, during the
period covered by this Report, worked to build common
ground in other areas. They also examined possible ways to
introduce more explicit priorities or surveillance and more
rigor in the IMF’s methodologies or assessing the eectiveness
o its surveillance work.
The Board supported several innovations in the implementation
o surveillance. Among these was the IMF’s rst multilateral
consultation, which ocused on ostering common under-
standing and cooperation on how to reduce global imbalances
while sustaining strong global growth. In addition, the
ramework or surveillance o the nancial sector and capital
markets was strengthened, based in part on the recommenda-
tions o an internal task orce on integrating the nancialsector into the surveillance work o the IMF. The task orce
urged the IMF to make better use o the Financial Sector
Assessment Program (a joint IMF–World Bank initiative
described in detail in Chapter 2) in the context o country
surveillance and to devote more attention to the links between
the nancial sector and the macroeconomy. As called or in
the MTS, the IMF’s analytical tools were increasingly applied
to capturing cross-country spillovers and drawing policy
lessons, while regional surveillance continued to be expanded,
with a view to deepening understanding o the impact o
regional developments on both the global economy andnational economies. The Board advocated sharpening country
surveillance, calling on sta to ocus on the most important
risks conronting members and on topics that are core to the
IMF’s mandate. The IMF also experimented with streamlined
Article IV consultations or a small number o countries.
High oil prices complicated policymaking, and the Board
provided advice to both exporters and importers o oil on
appropriate policy responses, bearing in mind that rising
demand, production constraints, and supply disruptions could
pose a threat to global growth or uel infationary pressures.
The Board continued to emphasize the need or more investment
in the oil sector and encouraged member countries to pass
international oil prices through to consumers in order to avoid
a distortion o consumption patterns.
The Board’s discussions o the World Economic Outlook
and the Global Financial Stability Report, the IMF’s primary vehicles or global surveillance, and other issues related to the
IMF’s surveillance activities in FY2007 are described in greater
detail in Chapter 2.
Program support
Many emerging market economies have strengthened their
policies, addressed vulnerabilities, and improved debt struc-
tures. Some—particularly in Asia—have accumulated large
reserves and expanded regional reserve pooling arrangements.
The prospects or emerging market economies remain positive,
with avorable nancial conditions and urther robust growth
expected to continue. As a result, most are now able to meet
their nancing needs or the coming year in the international
nancial markets, and their demand or IMF lending has
declined dramatically. Nonetheless, macroeconomic undamen-
tals still vary widely among emerging market economies and
vulnerabilities remain.
The IMF’s rst multilateral consul-
tation ocused on reducing global imbalances while sustaining strong
global growth. China, the euro
area, Japan, Saudi Arabia, and
the United States participated.
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In FY2007, the Executive Board considered ways to strengthen
the IMF’s support or emerging market economies. Given their
growing reliance on international capital fows, the deepening
o nancial sector and capital market surveillance would haveparticular relevance or these economies’ crisis-prevention
eorts. The Board also made progress toward developing an
instrument that would make nancing available to emerging
market economies with sound policies in the event o a
temporary loss o liquidity. Recognizing that a member’s own
policies are central to crisis prevention, the Board considered a
sta paper on the sources and costs o shocks and the policy
options that can best insulate members rom crisis.
new unsustainable debt burdens. The Board provided advice on
putting in place the kinds o macroeconomic policies that will
allow low-income countries to use aid eectively, and reviewed
a report by the Independent Evaluation Oce (IEO; see Box 5.3) on the IMF’s prior advice and actions with respect to aid
fows to sub-Saharan Arica (the IEO’s ndings are discussed in
Chapter 3). Given that the economic development o low-
income countries depends crucially on trade, the Executive
Board urged Fund members to work toward a successul
conclusion to the Doha Round o multilateral trade negotia-
tions. The IMF also continued to oer technical assistance in
such areas as tax and customs reorm to enable low-income
countries to benet ully rom trade liberalization, and stood
ready to provide nancial assistance to countries that might be
harmed in the short run by other countries’ trade liberalization.
A table detai ling the instruments through which the IMF
provides nancial and other assistance to member countries
can be ound in Chapter 3 (Table 3.1), along with more
inormation about the IMF’s lending activities and other
program support in FY2007.
Capacity building
As country surveillance has become more ocused, the close
relationship between surveillance and capacity building has
become increasingly apparent. The technical assistance and
training provided by the IMF can help member countries
implement the policy advice they receive during the course o surveillance. Work during FY2007 continued to ocus on
ensuring that technical assistance and training were more closely
aligned with the priorities o both the IMF and recipient
countries, and better coordinated with services provided by others.
In view o the critical need or additional capacity building in
developing countries, the Central Arica Regional Technical
Assistance Center (AFRITAC) was opened in Gabon to serve
countries in that area and a new regional training program was
established in India. The new AFRITAC—the third in Arica
and the sixth regional technical assistance center worldwide—
will complement the activities o the East AFRITAC and the West AFRITAC. The training center in India is the seventh
such center worldwide, with other regional training centers
located in Arica, East Asia, Europe, Latin America, and the
Over the past ew years, the IMF
has broadened the array o nanc-
ing and other instruments avail-
able to low-income countries.
The Executive Board also explored ways to deepen the IMF’s
engagement with low-income countries, in collaboration with
the World Bank, while ocusing on helping them achieve
macroeconomic stability and accelerate growth, the areas in
which the IMF is best equipped to assist as they strive to reduce
poverty and achieve the Millennium Development Goals.
Over the past ew years, the IMF has broadened the array o
nancing and other instruments available to low-income
countries. In FY2007 the Executive Board ocused on nding ways to help countries that have received debt relie—through
the Heavily Indebted Poor Countries (HIPC) Initiative and the
Multilateral Debt Relie Initiative (MDRI)—avoid building up
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Middle East. The IMF began to develop a plan, in collabora-
tion with the World Bank, to enhance capacity building in the
design o medium-term debt strategies in both emerging
market economies and low-income countries, to help themavoid the reaccumulation o unsustainable debt.
The process or allocating technical assistance resources has
been improved with the introduction o medium-term regional
plans that will be integrated with the IMF’s budget process.
The Board has also begun to explore ways to ensure adequate
nancing or capacity building amid growing demand,
including by increasing external nancing.
Quota and voice reorm
I the IMF is to reinorce its legitimacy, it must truly
represent—and must be seen as truly representing—all o itsmember countries. Thus, in FY2007, the Executive Board
embarked on ar-reaching quota and voice reorms, a central
goal o the MTS, to better align members’ quotas with their
economic weight in the global economy and to enhance the
participation and voice o low-income members.
In its communiqué o April 22, 2006, the International
Monetary and Financial Committee (IMFC) emphasized the
importance o governance reorm to saeguard and enhance the
IMF’s eectiveness and credibility as a cooperative institution,
and called or concrete proposals rom the IMF’s Executive
Board by the time o the September 2006 Annual Meetings.In response to the Executive Board’s recommendations,5 on
September 18, 2006, the Board o Governors adopted a
Resolution on Quota and Voice Reorm granting ad hoc quota
increases or China, Korea, Mexico, and Turkey, the our most
clearly underrepresented countries, and setting out a package
o more undamental reorms to be completed, i possible, by
the Annual Meetings o 2007 and no later than the Annual
Meetings o 2008.6
A work program involving consultations with the member-
ship and inormal and ormal Board discussions on various
elements o the package was initiated ater agreement wasreached on the Resolution. In a preliminary discussion in
January 2007, the Board generally endorsed the overall
ramework proposed by Fund sta or an amendment to the
IMF’s Articles o Agreement related to an increase in basic
votes.7 It also considered additional stang or Executive
Directors representing large constituencies—namely, the two
chairs or sub-Saharan Arica (see Chapter 5, ootnote 58).
In addition, the Board held two inormal discussions on
principles or a new quota ormula that will orm the basis
or a second round o ad hoc increases. In its April 14, 2007,
communiqué, the IMFC welcomed the progress to date and
called on the Executive Board to continue its work on the
reorm package as a matter o priority.
Communication and transparency The MTS stresses the importance o communication and
transparency in enhancing the eectiveness o surveillance and
in building support or sound economic policies. The Executive
5 See Press Release 06/189, “IMF Executive Board Recommends Quota and Related Governance Reorms,” on the CD-ROM or at www.im.org/external/np/sec/pr/2006/pr06189.htm.
6 See Press Release 06/205, “IMF Board o Governors Approves Quota a nd Related Govern ance Reorms,” on the CD-ROM or at www.im.org/external/np/sec/pr/2006/pr06205.htm, as well as the Board’s Resolution, which can be ound on the CD-ROM.
7 As stipulated in the Articles o Agreement, each member country’s voting power in the IMF is the sum o its 250 basic votes (the same or each member) and one vote per SDR 100,000 o its quota in the IMF. Until the mid-1970s, each member’s basic votes accounted or more than 10 percent o total votes; however, general increases in quotas have since reduced that share to about 2 percent.
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IMF Aa Rpr | 2007
Board plays a key role in the Fund’s communication eorts,
providing strategic guidance, conducting regular reviews o the
IMF’s communication strategy (the th review began during
FY2007), and, more generally, approving the IMF’s budget, which includes the resources allotted to communication and
outreach. During FY2007, the Board identied concrete steps
or strengthening the links between the IMF’s operations and
its communications, and or increasing the impact o commu-
nication and outreach—or example, by making key IMF
documents more readily available in languages other than
English, as described in greater detail in Chapter 5. The
Executive Board’s Committee on the Annual Report took steps
to make the Report a more eective communication vehicle,
not only or the IMF’s ocial stakeholders but also or a
broader audience.8
Executive Directors led the Fund’s eorts to increase its
transparency. In FY2006, they called on the sta to publish
annual updates on the implementation o the Fund’s
transparency policy. The second annual update, released in
February 2007, shows that the number o member countries
choosing to publish—publication is voluntary—all reports
on their economies and use o Fund resources increased to
142 in 2006, rom 136 in 2005, and the percentage o such
reports that were published increased or the third consecu-
tive year.
Improving internal governance
The IMF is committed to becoming a more cost-eective
institution, without compromising its ability to deliver the key
outputs called or in the MTS. Hence a collective eort by the
whole institution—the Board, the management, and the sta—
is in train to enhance eciency.
As discussed in more detail in Chapter 5, during FY2007,
the IMF continued to strictly limit administrative expendi-
tures. The medium-term budget called or zero growth, in
real terms, in FY2007, and real reductions in FY2008 and
FY2009. A number o initiatives were undertaken to deliver the
IMF’s outputs more eciently and at a lower cost, including
increased outsourcing, oshoring o some support services,
and a reexamination o travel expenditures.
The IMF took steps during the year to strengthen its risk-
management ramework. The Executive Board regularly reviews
the IMF’s risk-management policies, and, in 2006, it adopted
measures to implement a comprehensive risk-assessment systembased on the recommendations o a task orce. These measures
ocus on our broad categories o risks—strategic, core mission,
nancial, and operational. In FY2007, the IMF conducted its rst
risk-assessment exercise, which identied the main risks acing the
IMF and the measures in place to mitigate them. In their
discussion, Executive Directors stressed their oversight role and
critical duciary responsibility or the IMF’s risk management.
The Executive Board also acted to streamline Fund procedures,
lengthening the intervals between most policy reviews,
consolidating some reports, and eliminating others. It
considered a report on Bank-Fund collaboration, which wasprepared by an external review committee commissioned by
IMF and World Bank management, and sought possible
improvements in the way the two institutions work together
that would enable the IMF to deliver policy advice and
capacity-building services to member countries more eectively
and eciently (see Chapter 5). In addition, the Board reviewed
the report by the Independent Evaluation Oce (IEO) on the
IMF and aid to sub-Saharan Arica and endorsed a number o
recommendations that in its view would enable the IMF to
improve its policies and operations in this region (Chapter 3).
Reviewing the fnances o the Fund In May 2006, the Managing Director appointed a Committee
o Eminent Persons to study the IMF’s income model. The
Committee’s report, submitted to the Executive Board and
issued in January 2007, concluded that the IMF’s current
income model, under which the main source o income is the
interest charged on loans, is not appropriate given the wide
range o the IMF’s unctions and responsibilities.9 The
committee recommended a new set o revenue measures,
including expanded investment guidelines and operations, the
creation o an endowment rom limited IMF gold sales, and
charges or services to member countries. In its April 2007
meeting, the IMFC indicated that the committee’s report
provided “a sound basis or urther work on the development o
a new income model.” The Board’s work on a model that can
garner broad support across the IMF’s membership is ongoing.
8 Although the print version o the current Annual Report is much shorter than past Reports, the Report remains a comprehensive document o record because much o the material previously included in the print version has been transerred to the CD-ROM accompanying the Report.
9 The report can be ound on the CD-ROM or on the IMF’s Web site, at www.im.org/external/np/oth/2007/013107.pd.
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Chapter 2
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The IMF monitors the international monetary and nancial system to ensure that it is unction-
ing smoothly and to identiy vulnerabilities that could undermine its stability. To the same end, it
oversees economic policies in its 185 member countries, oering members analysis and advice and
encouraging them to adopt policies that promote nancial and macroeconomic stability and sus-
tained growth. The IMF’s surveillance activities at the global and country levels are complemented
by periodic assessments o regional developments, including the economic policies pursued under
ormal regional arrangements such as monetary unions. This combination o oversight and advice
is known as surveillance (Box 2.1).
During FY2007, the IMF introduced several innovations in its surveillance work. It experimented
with a new orum—multilateral consultations—where countries, or entities composed o groups
o countries, can work together on common issues. The rst multilateral consultation was set up
by the IMF to help its members address the risks posed by current global imbalances. The IMF
also devoted more attention to cross-country spillovers; increased its emphasis on regional devel-
opments in an eort to achieve a better understanding o how these aect individual countries as
well as the global economy; sharpened the ocus o its Article IV consultations, placing a greater
emphasis on exchange rate and nancial sector issues; and strengthened its outreach eorts, to
promote good policies and build consensus around them (see Chapter 5 or more inormation on
IMF outreach).
IMF Aa Rpr | 2007
18
Chapter 2 Promoting nancial and macroeconomic stability and growth through surveillance
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Prmi acia a macrcmic sabii a rw r srviac | 2
Going beyond changes in the day-to-day implementation o
surveillance, the Executive Board worked to strengthen and
modernize the IMF’s surveillance ramework. The Medium-
Term Strategy (MTS) calls or more emphasis on the originalgoal o IMF surveillance—assessing the consistency o
exchange rate and macroeconomic policies with national
and international stability. In FY2007, the Executive Board
reviewed the IMF’s 1977 Decision on Surveillance over
Exchange Rate Policies, which—together with Article IV
o the Articles o Agreement—is the main statement guid-
ing surveillance, and considered ways to clariy surveill-
ance priorities.
The IMF also took steps to better integrate nancial sector
analysis into Article IV consultations and regional surveillance
and to identiy links between the nancial sector and the
macroeconomy. Supporting these eorts is the new Monetary and Capital Markets Department (MCM), which was created
in early FY2007 (Box 2.2). As part o the reorganization o the
IMF’s nancial sector work in FY2007, responsibility or work
on issues related to anti–money laundering/combating the
nancing o terrorism (AML/CFT) was centralized in the IMF’s
Legal Department, which shares responsibility with MCM or
policy and operational questions regarding the integration o
AML/CFT into nancial sector work.
Box 2.1 Surveillance activities
t IMF’s exciv Bar ccs srviac a
ba, cr, a ria vs. gba srviac is
carri r Bar’s rviws wr cmic
a acia mark vpms a prspcs. t
sa’s World Economic Outlook (Weo) a Global Financial
Stability Report (gFSR), wic ar sa prpar wic a
ar, prvi majr ips Bar’s iscssis a
ar sbsq pbis. t Bar as s irma
iscssis wr cmic a acia mark
vpms. Ar impra isrm ba
srviac is Annual Report on Exchange
Arrangements and Exchange Restrictions (AReAeR), wic
F as pbis sic 1950.1
W a cr jis IMF, i maks a cmmim
r Aric IV IMF’s Arics Arm
sk prs picis cciv rr cmic
rw a pric sabii a avi maipai
xca ras r air cmpiiv avaa. I as
cmmis prvii IMF wi aa ab is
cm. t IMF is maa b Aric IV cc
srviac vrs mmbrs’ cmpiac wi s
biais, a i s s r rar (sa ar)
sa visis—kw as Aric IV csais—
mmbr cris.2 (Irma sa visis ak pac
bw csais.) t IMF sa am ccs
cmic a acia aa a iscsss wi vr-m a cra bak cias cmic vpms
sic prvis csai, as w as cr’s
xca ra a mar, sca, acia scr, a
srcra picis. o, am as ms wi r
rps sc as isars, ra is, acamics, a
acia mark paricipas. I prpars a smmar is
is a pic avic, wic i avs wi
aia ariis, w av pi pbisi i.
o rr IMF aqarrs, sa am prpars a
rpr scribi cmic siai a aks
wi ariis a vaai cr’s picis.
t rpr is sbmi exciv Bar r rviw
a iscssi. A smmar Bar’s viws is
rasmi cr’s vrm. tr is
ki pr rviw, ba cmmi prvis pic
iac a avic ac is mmbrs, a
sss iraia xpric ar br bar
aia picis. I mmbr cr ars,
Aric IV csai rpr a a Pbic Irmai
nic (PIn), wic smmarizs Bar iscssi, ar
pbis IMF’s Wb si, i i wi IMF’s
rasparc pic (s Capr 5).
Sppmi s ssmaic a rar Bar
rviws iivia mmbr cris ar exciv
Bar assssms cmic vpms a
picis i mmbr cris brrwi rm IMF, as
w as rq irma sssis a wic Bar
iscsss vpms i iivia cris. o a
var basis, cris ma as cs paricipai ji F-Bak Fiacia Scr Assssm
Prram (FSAP) r rqs Rprs obsrvac
Saars a Cs (RoSCs; Bx 2.3).
1 Appendix II, “Financial operations and transactions,” to this Rpr contains a brie summary o members’ exchange rate regimes in Table II.9, “De actoclassication o exchange rate regimes and monetary policy ramework.” The Appendix can be ound on the CD-ROM and on the IMF’s Web site, at www.im.r/xra/pbs//ar/2007//ix.m.
2 The IMF’s Articles o Agreement can be ound at www.im.r/xra/pbs//aa/ix.m.
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IMF Aa Rpr | 2007
Implementing Surveillance
Surveillance ocused on several key issues in FY2007, including
heightened volatility in nancial markets; the potential
spillovers and risks associated with a disorderly unwinding o
global imbalances; the possible impact o the slowdown in the
U.S. housing market on the global economy; and the eect o
high prices or oil and other commodities on both importing
and exporting countries. The analytical tools used in the
preparation o the World Economic Outlook and the Global
Financial Stability Report were applied to capture cross-
country spillovers and draw policy lessons.
Global surveillance
World Economic Outlook
In its August 2006 and March 2007 discussions o the World Economic Outlook (WEO), the Executive Board welcomed
the continued strong, broad-based expansion o the global
economy during calendar year 2006, noting that activity
in most regions met or exceeded expectations. Executive
Directors believed that the global expansion would slow only
modestly in 2007 and 2008 and that infationary pressures
would remain contained. They were generally o the view that
the market turbulence o February and March 2007 repre-
sented a correction ater a period o asset price buoyancy that
did not require a undamental revision in the positive global
economic outlook.
At the time o the March 2007 discussion, risks to the global
economy—the ongoing correction in the U.S. housing
market, persistently higher nancial market volatility, the
chance o a reversal o the decline in oil prices, and the
possibility o a disorderly unwinding o large global imbal-
ances—were still seen as tilted to the downside but appeared
to be more evenly balanced than they had been six months
earlier. The key question in assessing these risks is whether the
world economy will remain on a sound growth trajectory even
i the U.S. economy slows more sharply—that is, whether
global prospects might decouple rom the United States,
especially in view o the limited impact o the recent cooling
o U.S. activity.10
Global Financial Stability Report
At their March 2007 discussion o the Global Financial
Stability Report (GFSR), Executive Directors agreed that
global nancial and macroeconomic stability continued to be
underpinned by solid economic prospects, although downside
risks had increased somewhat in a ew areas. A number o
market developments warranted increased attention, refecting
a shit in underlying nancial risks and conditions since the
Board’s discussion o the previous GFSR in August 2006.
While none o the identied short-term risks constituted, in
and o itsel, a threat to nancial and macroeconomic stability,
adverse events in one area could lead to a reappraisal o risks
in other areas, with possible broader implications or the
economy. The market turbulence o February and March
10 The ull summings up o the Board discussions on the WEO are on the CD-ROM.
Box 2.2 Monetary and Capital Markets Department
Fwi p rcmmais i
nvmbr 2005 rpr exra Rviw grp
oraizai Fiacia Scr a Capia
Marks Wrk a F (xprs cmmissi b
IMF maam), Mar a Capia Marks
dparm (MCM) was cra i ar Fy2007.1
MCM, a mrr Iraia Capia Marks
a Mar a Fiacia Ssms par-
ms, craizs rspsibiiis, cis, a
xpris s w parms wii a w
raizaia srcr a srvs as a rsrc r
r F parms.
MCM is rspsib r pic, aaica, a
cica wrk rai acia scrs a
capia marks, a mar a rixca ssms, arrams, a prais.
Is pricipa asks ar ii pia risks
ba acia a macrcmic sabii a
ir impicais r iivia cris; assss
vrabii r sss cris’
mar a acia ssms a civ-
ss mmbr vrms’ vrsi s
ssms; prm saars r prvi
acia criss a crib prai
iraia arcicr risk miiai a
maam; a sppr capaci bii i
mmbr cris. MCM’s capaci-bii
aciviis ar scrib i Capr 4.
1 See Press Release 06/21, at www.im.r/xra/p/sc/pr/2006/pr0621.m.
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Prmi acia a macrcmic sabii a rw r srviac | 2
2007 validated this assessment and served to remind market
participants that such reevaluations could occur quite rapidly.
Macroeconomic risks as well as risks aced by emerging
markets had eased marginally since the previous GFSR, but
market and credit risks had risen, albeit rom relatively low
levels, and large capital infows to a number o emerging
market countries posed challenges to policymakers. The risks
o a disorderly unwinding o global imbalances had also eased
somewhat but remained a concern.
Hedge unds were playing a constructive role in improving
market eciency and stability, but the Board cautioned that
their size and complex risk structure could lead to increased
transmission or amplication o shocks. While observing that
the increased diversity o assets, source countries, and investortypes contributed to a globalized nancial system that, by
allowing capital to fow reely, should enable a more eective
diversication o risks, enhance the eciency o capital
markets, and support nancial and macroeconomic stability,
the Board underscored the importance o gradual and careully
sequenced liberalization o nancial markets. They welcomed the
GFSR’s contribution to nancial sector surveillance, including
in encouraging national legal, regulatory, and supervisory
systems to adjust to the more globalized nancial environment.
Executive Directors avored improved mechanisms or multi-
lateral collaboration, specically or strengthening supervisory coordination, including through better application o well-
established international standards and urther work on crisis
management and resolution arrangements.11
First multilateral consultation
In his April 2006 Report on Implementing the Fund’s Medium-
Term Strategy, the IMF’s Managing Director proposed that
existing IMF surveillance arrangements be complemented by
a new vehicle—multilateral consultations—that would oster
cooperation by appropriate groups o countries on policy
actions to address challenges to the global economy andindividual members. The proposal was endorsed by the
International Monetary and Financial Committee (IMFC),
the ministerial-level committee that provides the IMF with
policy guidance (see Chapter 5, “How the IMF is run”).
The IMF’s rst multilateral consultation has given its ve
participants—China, the euro area, Japan, Saudi Arabia, and
the United States—a orum or discussing global imbalances
and how best to reduce them while sustaining robust globalgrowth. The Executive Board will review the experience with
the rst multilateral consultation in FY2008.
Commodity prices
Because fuctuations in both oil and nonuel commodity
prices have important policy implications, the IMF has
been increasing its coverage o these markets in multilateral
surveillance. The Board has consistently advised oil-importing
countries, or example, on the importance o market-based
pricing—that is, putting an end to subsidies and allowing
the pass-through o oil prices to consumers. A chapter in the
September 2006 WEO was devoted to nonuel commodities—metals as well as ood and other agricultural commodities—
while considerable attention in both the September 2006
and the April 2007 WEO was given to the analysis o the
oil market and the eects o oil price changes on the global
economy. In their discussions o the WEO, Executive
Directors recognized the possibility that infationary pressures
could revive as resource utilization constraints start to bind.
They observed that sharply rising prices o nonuel commodi-
ties, particularly metals, had underpinned strong growth in
many emerging market and developing countries and advised
11 The ull summings up o the Board discussions on the GFSR are on the CD-ROM.
Worker in oil eld, Zhangaozen, Kazakhstan
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Box 2.3 ROSCs and Data Standards Initiatives
Rrs h obsrvac Saars a
Cs (RoSCs). Mmbr cris ca rqs
RoSCs, assssms ir bsrvac saars
a cs, i a wi 12 aras:
acci; aii; ai–m ari a
cmbai aci rrrism (AMl/CFt);
baki sprvisi; crpra vrac; aa
issmiai; sca rasparc; isvc a
crir ris; israc sprvisi; mar a
acia pic rasparc; pams ssms; a
scriis rai. t rprs—ab 76 prc
wic av b pbis—ar s p
sarp F a Wr Bak pic iscssiswi aia ariis a sr aia
capaci paricipa i, a b rm,
baiz cm. t ar as s i priva
scr (ici b rai acis) r risk assssm.
Paricipai i Saars a Cs Iiiaiv
cis rw. As -Apri 2007, 811 RoSC
ms a b cmp r 137 cris, r
74 prc F’s mmbrsip, a ms
ssmica impra cris a vr r
assssms. Mr a 380 RoSCs wr
acia scr saars. o s, ab -ir
wr ra baki sprvisi, a rs
wr air v isrib acrss r
saars a cs.
Scia daa dissmiai Saar (SddS).
Cra i 1996 b exciv Bar, SddS is a
var saar ws sbscribrs—cris wi
accss iraia capia marks r ski i—
cmmi mi iraia accp rms
aa cvra, rqc, a imiss. SddS
sbscribrs prvi irmai ab ir aa
cmpiai a issmiai pracics (maaa)
r psi IMF’s dissmiai Saars
Bi Bar (dSBB).1 eac sbscribr is as rqir
maiai a Wb si a issmias aca
aa a a is crica ik dSBB.
SddS sbscribrs ba issmiai prscrib
aa xra b i Spmbr 2003; aa r
58 cris ar pbis i Wr Bak’s
Quarterly External Debt Statistics (QedS). Mva
a lxmbr bcam sbscribrs i Fy2007,
raisi mbr SddS sbscribrs 64 as
Apri 30, 2007.
Gra daa dissmiai Ssm (GddS). t
exciv Bar sabis gddS i 1997 p
IMF mmbr cris imprv ir saisica ssms.
t 88 paricipas i gddS a -Apri 2007prvi maaa scribi ir aa cmpiai
a issmiai pracics, as w as ai pas
r imprvm, r psi IMF’s dSBB.
Bw exciv Bar’s six rviw daa
Saars Iiiaivs i nvmbr 2005 a Apri 30,
2007, i cris a rriris ba paricipa-
i i gddS. o 94 cris a rriris
a av paricipa i gddS sic i was
irc, 6 av raa SddS.
t cmpm SddS a gddS, IMF sa av
ac Saisica daa a Maaa
exchag (SdMX) iiiaiv a daa Qai
Assssm Framwrk (dQAF). t SdMX, wic
is bi vp i cabrai wi r
iraia raizais, aims mak cric
xca a maam saisica irmai
am aia a iraia iis mr
ci b prvii saar pracics, cr
prcs, a r irasrcra bpris r
rpri, xcai, a psi aa Wb
sis. t dQAF is a assssm m a
was ira i srcr aa RoSCs
wi r rviw daa Saars
Iiiaivs i 2001.
1 The Web site address is sbb.im.r/Appicais/wb/sbbm.
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these countries to save or invest current revenue windalls to
support uture growth in noncommodity sectors. They also
stressed the risk o a reversal o the recent decline in oil prices
given continuing geopolitical tensions and limited spareproduction capacity.
The international community is working to improve the quality
and transparency o oil market data. In this context, the IMF
is increasing the provision o metadata in the General Data
Dissemination System and the Special Data Dissemination
Standard (see “Standards and codes, including data dissemina-
tion” on page 26 and Box 2.3 above). In responding to
extensive demand or better data, the IMF is sharing its
expertise in data-quality assessment with other international
organizations and collaborating with major oil exporters in
resolving oil-related data issues. The IMF has also participatedin training on the Joint Oil Data Initiative (JODI).12
Country surveillance
In FY2007, the Board completed 134 Article IV consultations
(see CD-Table 2.1 on the CD-ROM). Country surveillance is
becoming more ocused on identiying the most important risks
acing members and on topics that are core to the IMF’s
mandate. As an approach or cases in which it appeared useul to
concentrate on a ew key issues, and in keeping with the MTS’s
calls or enhancing the eciency o Fund procedures, the IMF
experimented with streamlined consultations with 10 countries
during FY2007 to allow additional resources to be devoted to
areas o priority work. The Board plans to review the IMF’s
experience with the streamlined consultations early in FY2008.
As discussed in detail below, considerable work was undertaken
in FY2007 to modernize the ramework or IMF surveillance
and to integrate the analysis o developments in the nancial
sector and capital markets more ully into country surveillance.
Recent eorts have also ocused on a deeper examination o
cross-country spillovers. As demonstrated by a stocktaking o
the quality o exchange rate surveillance (see below), these
eorts are gradually bearing ruit.
The IMF’s Global Fiscal Model13 has been used in the context
o country surveillance, notably to evaluate the broader impacts
o scal policy changes—including scal consolidation, tax
reorm, and social security reorm—in a number o industrial
and emerging market countries. The WEO’s analysis o the
impact o a slowdown in the U.S. economy on the rest o the
world used a variety o econometric and modeling approaches
to assess cross-country spillovers.
Regional surveillance and outreach
Since members o currency unions have devolved responsibili-
ties over monetary and exchange rate policies—two central
areas o Fund surveillance—to regional institutions, the IMF
holds discussions with representatives o these institutions in
addition to its Article IV consultations with the unions’
individual members. In response to guidance by the Executive
Board under the Medium-Term Strategy, IMF sta also
conduct other regional surveillance activities, including the
production o semiannual regional economic outlooks
(REOs), dialogues with various regional orums, and research
on issues in which countries in the same region share an
interest; and more systematically apply relevant fndings o
regional surveillance in conducting Article IV consultations.Selected papers and reports increasingly ocus on regional
spillovers and cross-country experiences.
During FY2007, the IMF’s Executive Board discussed
developments in the Central Arican Economic and Monetary
Community (CEMAC), the Eastern Caribbean Currency
Union (ECCU), the euro area, and the West Arican
Economic and Monetary Union (WAEMU).14
12 Following a period o exceptional volatility in oil prices in the 1990s, in 2001 six international organizations—Asia-Pacic Economic Cooperation (APEC),Eurostat, the International Energy Agency (IEA), Organización Latinoamericana de Energia (OLADE), OPEC, and the United Nations Statistics Division (UNSD)—launched the initiative, originally called the Joint Oil Data Exercise, to raise awareness o the need or more data transparency in oil markets. More inormation can be ound on JODI’s Web site, at www.jodidata.org/FileZ/ODTmain.htm.
13 The Global Fiscal Model (GFM) is a multicountry general equilibrium model developed at the Fund based on the New Open Economy Macroeconomics (NOEM) tradition, but designed to examine scal policy issues. It is particularly suitable or studying temporary or permanent changes in taxes or expenditures, whether occurring rapidly or gradually (as in the case o age-related expenditure pressures). The multicountry eature o the GFM allows the analysis o international spillover eects as changes in government debt infuence world interest rates. The GFM also permits practitioners to assess the macroeconomic eects o a number o alternative scal-consolidation strategies.
14 The summings up o these Board discussions can be ound on the CD-ROM and on the IMF’s Web site: PIN 06/90, “IMF Executive Board Concludes 2006 Discussion on Common Policies o Member Countries with CEMAC,” www.im.org/external/np/sec/pn/2006/pn0690.htm; PIN 07/13, “IMF Executive Board Concludes 2006 Regional Discuss ions with Eastern Caribbean Currency Union,” www.im.org/external/np/sec/pn/2007/pn0713.htm; PIN 06/86,“IMF Executive Board Discusses Euro Area Policies,” www.im.org/external/np/sec/pn/2006/pn0686.htm; and PIN 07/55, “IMF Executive Board Concludes 2007 Consultation with West Arican Economic and Monetary Union,” www.im.org/external/np/sec/pn/2007/pn0755.htm.
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CEMAC. At their July 2006 discussion, Executive Directors
commended CEMAC’s positive macroeconomic perormance
in 2005, which was due in part to oil windalls and improved
implementation o macroeconomic policies. Per capita incomein most CEMAC members remains low, however, and these
countries ace signicant challenges in meeting the Millennium
Development Goals. The Board urged the authorities to take
advantage o improved macroeconomic and nancial condi-
tions to address long-standing structural issues that are critical
or raising non-oil growth and employment and reducing
poverty. They also noted the potential or regional integration
to increase market size and oster growth and called or a
renewed ocus on the promotion o trade. CEMAC participated
in an FSAP (see below), which ound that nancial sector
soundness had improved but that important challenges
remained. Executive Directors urged CEMAC countries to
urther strengthen nancial and macroeconomic stability and
accelerate reorms, particularly as the nancial sectors in the
region are among the least developed in the world.
ECCU. The Board welcomed the resurgence in economic
activity in recent years, driven by tourism, preparations or
the Cricket World Cup, and a pickup in private investment.
ECCU’s quasi-currency-board arrangement has resulted in a
long period o price stability, and the currency appears
competitive. The challenge will be to sustain the growth
momentum in 2007 and beyond. The ECCU countries,
which are oil importers, continue to ace s ignifcant
obstacles, including elevated world energy prices and a
heavy public debt burden, and exporters o sugar and
bananas will need to adjust to the erosion o trade preer-
ences. Further regulatory, administrative, and legal reorms
are needed to remove impediments to private business
activity. Executive Directors urged continued strengthening
o the supervisory and regulatory environment that supports
fnancial market development.
Euro area. Growth has picked up and broadened in the euro
area, the reormed Stability and Growth Pact is regaining traction over scal policies, scal outcomes have been better
than originally projected, and progress has been made in the
reorm o product and services markets and nancial
integration. However, the Board saw risks tilting to the
downside or 2007 and beyond. Productivity growth
continues to be sluggish, employment and consumption
continue to lag, oil prices are volatile, and global imbalancesremain unresolved. Executive Directors underscored the
need or accelerated scal consolidation and urther s truc-
tural reorms that aim at strengthening incentives to work
and invest.
WAEMU. The overall economic situation in WAEMU was
challenging in 2006. Infation ell sharply despite higher prices
or uel imports, and oreign reserve levels remained adequate,
but average growth declined to 3.4 percent and the current
account decit widened. Progress on policy convergence,
economic integration, and structural reorms has been slow,
and growth and deeper regional integration are hampered by
macroeconomic shocks, structural weaknesses, and, in some
countries, sociopolitical problems. However, WAEMU is
stepping up eorts to remove these obstacles. In 2006, it
embarked on trade reorm and instituted an ambitious reorm
program or 2006–10. Given that the region’s nancial sector is
unintegrated and shallow, the Board welcomed the authorities’
request or a regional FSAP.
Regional Economic Outlooks (REOs) are produced semiannu-
ally or sub-Saharan Arica, Asia and the Pacic, the Middle
East and Central Asia, and the Western Hemisphere.15 Upon
publication o the REOs, the IMF organizes press conerences
or seminars at headquarters or in the eld. Area department
sta oten go on road shows to present REO ndings at
dierent venues to diverse audiences in the region in question.
The Middle East and Central Asia Department, or example,
organizes outreach activities in association with its REOs twice
a year in Dubai, Central Asia, and North Arica.
Intensied outreach has contributed to wider dissemination o
the ndings o IMF studies and stimulated debate on regional
issues. In addition to the activities undertaken in connection
with the publication o the REOs, the Fund organizes regionalconerences and seminars either on its own or in collaboration
with regional entities. (For examples, see the section on
outreach in Chapter 5.)
15 The ull text o these reports can be ound on the IMF’s Web site, at www.im.org. There are plans to publish a Regional Economic Outlook or Europe begin- ning in the all o 2007.
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Financial sector surveillance and the Standards
and Codes Initiative
For countries to reap the ull beneit o cross-border capital
lows, which have increased dramatically over the past two
decades, their inancial sectors must be resilient and well
regulated. In 1999, the IMF and the World Bank intro-
duced a joint initiative, the FSAP, to provide member
countries, on a voluntary basis, with a comprehensive
evaluation o their inancial systems. The FSAP, a corner-
stone o inancial sector surveillance, provides the basis or
the IMF’s Financial System Stability Assessments (FSSAs)
—assessments o risks to macroeconomic stability stem-
ming rom the inancial sector, including the latter’s ability
to absorb macroeconomic shocks.
Regional FSAPs can be undertaken or currency unions,
notably where signicant regulatory and supervisory structures
are at the regional level. As described above, a regional FSAP—
or CEMAC—was completed in FY2007, and WAEMU
requested an FSAP. In addition, the IMF has undertaken
regional nancial sector projects in Central America, the
Maghreb, and the Nordic-Baltic region.16
With a total o 123 initial assessments now completed or under
way, the IMF and the World Bank are increasingly ocusing on
FSAP updates. The core elements o updates include nancial
stability analysis, actual updates o the observance o standards
and codes included in the initial assessment,17 and reexamination
o key issues raised in the initial assessment. Updates usually
require only a single visit by an IMF–World Bank team (initial
assessments require two)—and a smaller team—and hence are
typically less resource-intensive than initial assessments.
In FY2007, 18 FSAPs were completed, o which 6 were
updates;18 another 53 (o which 30 are updates) are either
under way or agreed and being planned.
16 See Box 3.4, “Regional nancial integration in Central America,” in the IMF’s Annual Report 2006, at www.im.org/external/pubs/t/ar/2006/eng/index.htm.
17 Factual updates describe developments that are relevant to compliance with standards and codes but do not reassess the ratings in the initial FSAP.
18 These numbers reer to FSSAs discussed by the Board during FY2007.
The Bovespa stock exchange, São Paulo, Brazil
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Work is progressing on incorporating a nancial sector
component into the IMF’s Global Economy Model.19 The
IMF is also studying both the implications o growing
international nancial integration or national scal policiesand the linkages between the nancial sector and scal
institutions and policy.
Standards and codes, including data dissemination
In the wake o the Asian crisis o 1997–98, during their
discussions on strengthening the international nancial
architecture, Executive Directors stressed the need to develop
and implement internationally recognized standards and codes
o good practice that would oster nancial and macroeconomic
stability at both the domestic and the international levels. The
result was the launch o the Standards and Codes Initiative in
1999. The IMF and the World Bank evaluate member
countries’ policies against international benchmarks o good
practice in three broad areas—transparent government
operations and policymaking, nancial sector standards, and
market integrity standards or the corporate sector—and issue
Reports on the Observance o Standards and Codes (ROSCs;
see Box 2.3), which are intended to help countries strengthen
their economic institutions, to inorm the work o the IMF and
the Bank, and to inorm market participants. Following up
on the Executive Board’s review o the Standards and Codes
Initiative in FY2006 and the recommendations o the MTS,
the Initiative has been strengthened, with clearer country prioritization o ROSCs and updates, better integration o
ROSCs with surveillance and technical assistance, and greater
clarity o ROSCs. Several standards have been revised in recent
years, and the revised standards are now being used as the basis
or assessments. For example, in April 2007, the Board
endorsed the new Basel Core Principles20 standard and
methodology released in October 2006.
Underpinning assessments o scal transparency in 86 countries
under the Standards and Codes Initiative is the IMF’s Code o
Good Practices on Fiscal Transparency, which was revised during
FY2007, ater a broad public consultation process. The Code,launched in 1998, is a central element in the IMF’s eorts to
help members implement standards in the areas o transparency
and good governance. Fiscal transparency leads to better-
inormed public debate about scal policy, makes governments
more accountable or policy implementation, and strengthens
government credibility, thereby strengthening countries’
capacity or sound macroeconomic policymaking, public debt
management, and budget preparation.21 A major aim o the
revised Code is to ully integrate issues related to resource-
revenue transparency, drawing on experience gained rom use o
the IMF’s 2005 Guide on Resource Revenue Transparency, which
ocuses on the problems o countries that derive a signicant
share o their revenues rom hydrocarbon and mineral
resources. The revised Code also extends the coverage o good
practice to address more explicitly some key scal transparency
issues, such as scal risk management, the openness o budgets
and policy decisions, external audit processes, and the publica-
tion o a citizens’ guide to the budget. Extensive revisions have
also been made to the Manual on Fiscal Transparency, which
provides detailed guidance on good scal transparency
practices, with examples rom a range o developing, emerging,
and advanced economies.22
19 The Global Economy Model (GEM), which the IMF has been developing since 2002, is a large, multicountry macroeconomic model based on an explicit micro- economic ramework in which consumers maximize utility and producers maximize prots. The integration o domestic supply, demand, trade, and international asset markets in a single theoretical structure allows transmission mechanisms to be ully articulated, providing new insights not obtainable rom earlier models. A range o GEM simulations have been used in IMF work to assess issues such as the domestic and international consequences o policies to increase competition in markets, the impact o oil price increases, the eects on emerging market countries o exchange rate volatility across industrial countries, and appropriate monetary
policy rules or emerging market countries. A detailed description o the model can be ound at www.im.org/external/np/res/gem/2004/eng/index.htm.
20 The Core Principles or Eective Banking Supervision, which the Basel Committee on Banking Supervision originally published in September 1997, were updated in 2006 to keep pace with changes in banking regulation. The Core Principles and the Core Principles Methodology are used by countries as a benchmark or assess- ing the quality o their supervisory systems and or identiying uture work that needs to be done to overcome regulatory and supervisory shortcomings. The IMF and the World Bank also use the Core Principles in the context o the Financial Sector Assessment Program to assess countries’ banking supervision systems and practices.
21 The Code can be ound at www.im.org/external/np/ad/trans/code.htm.
22 Available at www.im.org/external/np/ad/trans/manual/index.htm.
Since the Asian crisis o 1997–98,
the analysis o balance sheet
vulnerabilities has become an
increasingly important part o
country risk assessment at the IMF.
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In addition, in September 2006 the IMF began publishing
International Financial Statistics, Supplement on Monetary and
Financial Statistics, Supplement Series No.17, a quarterly
compilation o monetary and nancial statistics or 65countries. These data are an important input or compiling
the matrices o the IMF’s balance sheet approach to assessing
debt vulnerabilities. Since the Asian crisis, the analysis o
balance sheet vulnerabilities has become an increasingly
important part o country risk assessment at the IMF.
Inormation about balance sheets in a country’s key eco-
nomic sectors (public, private nancial and nonnancial,
and household and nonresident) acilitates assessments o
maturity, currency, and capital structure mismatches as well
as intersectoral linkages.
In view o the evolving economic environment and changing needs or economic analysis, the IMF is updating macro-
economic statistical standards in close collaboration with
member countries and other international organizations. The
IMF is contributing to the update o the System o National
Accounts 1993, and it has drated and posted on its Web site
or worldwide consultation the sixth edition o the Balance o
Payments and International Investment Position Manual and the
Export and Import Price Index Manual. The update o the
various statistical standards is being coordinated to ensure
maximum harmonization o statistical methodologies. The
methodological standards in statistics underpin the IMF’s
work on data ROSCs, technical assis tance, and training, andpromote the comparability o data and best practices in
statistical methodology.
Modernizing the Surveillance Framework
and Integrating Financial Sector Analysis
Over the past 30 years, the Executive Board has reviewed the
IMF’s surveillance work at regular intervals. From 1988 to
2004, reviews were conducted biennially. A decision was made
in 2006 to move to triennial reviews in accordance with the
MTS’s call or streamlining IMF procedures. The most recent
review, conducted in 2004, called or deeper treatment o
exchange rate issues, including (1) clear identication o the
de acto exchange rate regime in sta reports, (2) more
systematic use o a broad set o indicators and analytical tools
to assess external competitiveness, and (3) a thorough and
balanced presentation o the policy dialogue between the sta
and the authorities on exchange rate issues.23 Following up on
these recommendations, in August 2006, the Executive Board
discussed a paper by IMF sta assessing the quality o recent
work by the IMF on exchange rate issues in 30 large econo-
mies accounting or more than 90 percent o world GDP.24
Executive Directors generally agreed that exchange rate
surveillance had improved appreciably since the 2004 review
and that the quality o the analysis was mostly adequate in
three o the our dimensions reviewed—the description o the
exchange rate regime, the assessment o the regime, and the
consistency o exchange rate policies with external stability—
23 The Biennial Surveillance Review can be ound on the IMF’s Web site, at www.im.org/external/np/sec/pn/2004/pn0495.htm.
24 The paper, “Treatment o Exchange Rate Issues in Bilateral Fund Surveillance—A Stocktaking,” can be ound on the IMF’s Web site, at www.im.org/external/pp/longres.aspx?id=3951. The summing up o the Board discussion can be ound on the CD-ROM and on the IMF’s Web site: PIN 06/131, “IMF Executive Board Discus ses Treatment o Exchange Rate Issues in Bilateral Surveillance—A Stocktaking,”
www.im.org/external/np/sec/pn/2006/pn06131.htm.
Currency exchange board, Bangkok, Thailand
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but that there was room or better analysis in the ourth, the
assessment o exchange rate levels and external competitive-
ness. The Board also called or a greater ocus on the spillover
eects o countries’ exchange rate policies.
As part o the eort to strengthen the IMF’s ramework or
assessing exchange rate issues, at an inormal seminar in
November 2006, the Executive Board discussed a sta report
on revised and extended methodologies or exchange rate
assessments by the IMF’s Consultative Group on Exchange
Rate Issues (CGER). The CGER, which has provided
exchange rate assessments or a number o advanced econo-mies since the mid-1990s, has extended its methodologies to
cover about 20 emerging market countries. These methodolo-
gies can help gauge the consistency o current account
balances and real eective exchange rates with their underly-
ing undamentals. Sta organized outreach events with
ocials, academics, and market participants in Europe, Asia,
and Arica to discuss this extension and approaches to
exchange rate modeling.25
Complementing the periodic eorts o the Executive Board and
the Fund’s management and sta to take stock o the eective-
ness o surveillance, the IMF’s Independent Evaluation Oce
(IEO; see Box 5.3) completed an evaluation in FY2007 o the
IMF’s exchange rate policy advice, or discussion by the
Executive Board in early FY2008.26 The IEO set out to answer
three main questions: Is the role o the IMF clearly dened and
understood? How good is the quality o the IMF’s advice andits underlying analysis? And how eective is the IMF in its
policy dialogue with country authorities? Its report acknowl-
edges that the quality o the IMF’s advice to its member
countries had improved in some ways rom 1999 to 2005,
citing many examples o good analysis and dedicated sta
teams. At the same time, it identies a need to revalidate the
undamental purpose o IMF exchange rate surveillance and
thus clariy the expected roles o the IMF and member
countries, oering detailed recommendations or improving the
management and conduct o the IMF’s exchange rate policy
advice and interactions with member countries.
The principles and procedures governing the scope and
operational modalities o surveillance over exchange rate
policies were adopted by the Executive Board in 1977, ater
the collapse o the Bretton Woods system o xed exchange
rate parities.27 In FY2007, the Board held discussions on the
possibility o revising the Decision to broaden it to cover
surveillance more comprehensively, and to align it more
closely with Article IV and current best practice.28 A revised
decision would not only demonstrate the Fund’s resolve to
strengthen the eectiveness o surveillance, including over
exchange rates, but also serve as a basis or the practice o surveillance, uniying guidance, clariying issues and proce-
dures, and providing a better oundation or surveillance to
address priority issues. In their discussion, Executive Directors
ound important areas o broad agreement and subsequently
worked to build common ground on other areas. At the
Spring Meetings o the IMF and the World Bank, the IMFC
agreed that the ollowing principles should guide urther
work: (1) there should be no new obligations, and dialogue
and persuasion should remain key pillars o eective surveil-
lance; (2) surveillance should pay due regard to country
circumstances and emphasize the need or evenhandedness;
and (3) a revised decision should be fexible enough to allow
surveillance to evolve as circumstances warrant.29
25 See Press Release 06/266, “IMF Strengthening Framework or Exchange Rate Surveillance,” on the CD-ROM or at www.im.org/external/np/sec/pr/2006/pr06266.htm.
26 The IEO’s report can be ound at www.ieo-im.org/eval/complete/eval_05172007.html.
27 The 1977 Decision on Surveillance over Exchange Rate Policies can be ound on the IMF’s Web site, at www.im.org/external/pubs/t/sd/index.asp?decision=5392-(77/63).
28 See “Article IV o the Fund’s Articles o Agreement: An Overview o the Legal Framework,” a paper prepared by IMF sta, at www.im.org/external/np/pp/eng/2006/062806.pd.
29 On June 15, 2007, ater the end o the nancial year, the Board adopted the 2007 Decision on Bilateral Surveillance over Members’ Policies, which replaces the 1977 Decision. The summing up o the Board discussion can be ound at www.im.org/external/np/sec/pn/2007/pn0769.htm.
The IMF Executive Board has
strengthened surveillance over exchange rate policies and called
or greater scrutiny o the linkages
between the nancial sector and
the macroeconomy.
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During FY2007, the Board also exchanged views on the
possibility o introducing a clear statement o surveillance
priorities to guide implementation and acilitate ex post
monitoring o eectiveness (a “remit”), against the backgroundo the existing accountability and independence ramework. In
doing so, it examined methods or assessing the eectiveness o
IMF surveillance and agreed that a strengthened methodology
should be introduced in the context o the next review o
surveillance, scheduled to take place in FY2008.
Integrating fnancial sector and capital markets analysis
into surveillance
A task orce was established in FY2006 to study the issue o
how to better integrate the IMF’s nancial sector work into its
surveillance. The task orce delivered its recommendations in
FY2007, emphasizing the need or a broader multilateral
perspective, more ocus on the nancial sector’s impact on
growth and the macroeconomy, and a thorough assessment o
risks. Following up on these recommendations, the IMF has
increased interdepartmental cooperation and prioritized its
nancial sector work, with heightened monitoring o both
systemically important countries and countries vulnerable
to crisis.
The IMF also contributes to international eorts to combat
money laundering and the nancing o terrorism, in collabo-
ration with the Financial Action Task Force on Money Laundering (FATF), the World Bank, the United Nations,
and FATF-style regional bodies (FSRBs). As a collaborative
institution with near universal membership, the IMF is a
natural orum or sharing inormation, developing common
approaches to issues, and promoting desirable policies and
standards. In addition, the IMF’s broad experience in
conducting nancial sector assessments, providing technical
assistance in the nancial sector, and exercising surveillance
over members’ economic systems is particularly valuable in
evaluating country compliance with international AML/CFT
standards and in developing programs to help them address
shortcomings. In 2004, the Executive Board agreed to make
AML/CFT assessments and technical assistance a regular part
o Fund work and to expand this work to cover the ull scope
o the FATF’s 40 recommendations designed to guide national
policymakers in implementing eective anti–money launder-
ing programs and 9 additional recommendations on combat-ing the nancing o terrorism.
In its June 2006 discussion o a paper jointly prepared by
IMF and World Bank sta on the quality and consistency o
assessments o national AML/CFT regimes,30 which are carried
out by the IMF, the World Bank, the FATF, or the FSRBs,
using an agreed common methodology, the Executive Board
reiterated the importance o AML/CFT in strengthening the
integrity o nancial systems and deterring nancial abuse and
conrmed the IMF’s collaborative arrangements with the
FATF and FSRBs or assessing AML/CFT regimes. As part o
its review, the Executive Board examined the ndings o anexpert panel that had analyzed a sample o AML/CFT
assessments prepared by dierent bodies and concluded that
there was a high degree o variability in the quality and
consistency o the reports. The Executive Board noted that
a number o initiatives had been taken or were under way to
improve the assessments and called on IMF sta to provide
technical assistance to, and cooperate more closely with,
the FSRBs.
The Board also agreed that every assessment or update under
the FSAP or Oshore Financial Center (OFC) assessment
program31 should include a ull AML/CFT assessment using
the most recent methodology and that ull AML/CFT
assessments should be conducted approximately every ve
years. The Fund is expected to continue monitoring
signicant nancial sector problems arising rom money
laundering or terrorism-nancing activities through other
vehicles, such as assessments o other nancial sector
standards, Article IV consultations, and participation in
FATF and regional orums.
The Executive Board has consistently underscored the
importance o nancial soundness indicators (FSIs) in
acilitating nancial sector surveillance, increasing the
transparency and stability o the international nancial
30 The sta paper is available at www.im.org/external/np/pp/eng/2006/041806r.pd. The summing up o the Board’s discussion can be ound on the CD-ROM and on the IMF’s Web site, at www.im.org/external/np/sec/pn/2006/pn0672.htm.
31 The OFC assessment program was initiated in 2000. The monitoring o OFCs, to ensure their compliance with supervisory and integrity standards, has become a standard component o the IMF’s nancial sector work.
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system, and strengthening market discipline. Ater developing
a core set and an encouraged set o FSIs in consultation with
the international community, the IMF launched the three-
year pilot Coordinated Compilation Exercise (CCE), which was endorsed by the Board, in March 2004 to (1) build the
capacity o the 62 part icipating countries to compile FSIs;
(2) promote cross-country comparability o FSIs;
(3) coordinate eorts by national authorities to compile FSIs;
and (4) disseminate the FSI data compiled in the CCE, along
with metadata, to increase t ransparency and strengthen
market discipline. The methodology recommended by the
IMF to ensure cross-country comparability is presented in the
Financial Soundness Indicators: Compilation Guide.32
By the end o FY2007, FSI data and metadata or 52 o the
62 countries participating in the CCE were posted on the
IMF’s Web site.33 Many countries also regularly compile
and disseminate FSIs on their own, and these indicators are
included in FSAP documents.
32 The Guide can be ound at www.im.org/external/pubs/t/si/guide/2006/index.htm. The list o core and encouraged FSIs can be ound at www.im.org/external/np/sta/si/eng/si.htm.
33 Another ve countries posted their data and metadata in the rst month o FY2008; see www.im.org/external/np/sta/si/eng/cce/index.htm.
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Chapter 3
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The IMF provides nancial and other kinds o support to its member countries through a variety
o instruments, including lending acilities, tailored to their dierent circumstances (Table 3.1).
Review and approval o members’ requests or nancial assistance and program support are core
responsibilities o the Board, alongside surveillance.
Under the Fund’s lending acilities, the Board makes temporary nancing available to members to
help them address a variety o balance o payments problems, such as a lack o sucient oreign
exchange to purchase needed imports or make payments on external obligations. IMF loans give
countries time to adjust their policies so as to overcome short-term balance o payments problems,
stabilize their economies, and avoid similar problems in the uture. IMF lending is not intended to
cover all o a borrower’s needs but, rather, to have a catalytic eect—enabling a country to restore
condence in its policies and attract nancing rom other sources. Loans are accompanied by eco-
nomic reorm programs developed by the borrowers in collaboration with the IMF. The Executive
Board regularly reviews borrowers’ perormance under their programs, and, in most cases, unds
are disbursed as program targets are met.
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Chapter 3 Program support
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34 CD-Tables 3.1 and 3.2 , which show subsidy contribution pledges as o April 30, 2007, or the ESF and or Emergency Assistance, respectively, can be ound on the CD-ROM.
35 The HIPC Initiative was launched by the IMF and the World Bank in 1996 and enhanced in 1999 to provide aster, deeper, and broader debt relie and to strengthen the links between debt relie, poverty reduction, and social policies. CD-Tables 3.3 and 3.4, which show the delivery o debt relie as o
April 30, 2007, can be ound on the CD-ROM. More inormation about the HIPC Initiative can be ound on the IMF’s Web site, at www.im.org/external/np/exr/acts/hipc.htm.
Regular nancing activities. The bulk o the IMF’s loans are
provided through Stand-By Arrangements (SBAs), which
address members’ short-term balance o payments diculties,
and the Extended Fund Facility (EFF), which ocuses onexternal payments diculties caused by longer-term structural
problems. For members experiencing a sudden and disruptive
loss o access to capital markets, these loans can be supple-
mented with short-term resources rom the IMF’s Supplemental
Reserve Facility (SRF). In addition, special Emergency
Assistance is available to countries recovering rom conficts or
natural disasters. All o these loans incur interest charges, and
many may be subject to surcharges, depending on the type and
duration o the loan and the amount o IMF credit outstand-
ing. Repayment periods vary by type o loan. The IMF’s regular
lending activities are nanced out o a revolving pool o unds
held in the General Resources Account (GRA) and consisting mainly o members’ quota subscriptions. In addition, the IMF
has in place two ormal borrowing arrangements with member
countries and can borrow to supplement its quota resources.
Financing or low-income countries. The IMF provides support
to its low-income members through a variety o instruments.
These include highly subsidized lending through the Poverty
Reduction and Growth Facility (PRGF) and the Exogenous
Shocks Facility (ESF); subsidized Emergency Assistance or
eligible post-confict countries and countries hit by natural
disasters;34 and debt relie under the Heavily Indebted Poor
Countries (HIPC) Initiative and the Multilateral Debt Relie Initiative (MDRI).35 The PRGF, the main instrument or
provision o IMF nancial support to low-income countries,
ocuses on poverty reduction in the context o a growth-oriented
economic strategy, while the ESF provides concessional assistance
to low-income members that are acing sudden exogenous shocks
but do not have a PRGF arrangement in place. A low-income
country seeking a PRGF or ESF loan or debt relie must prepare
a Poverty Reduction Strategy Paper (PRSP) in a participatory
process involving civil society; the PRSP is considered by the
Boards o the IMF and the World Bank, but the strategy is
developed and owned by the country. The unds or PRGF loans
come rom trust unds administered by the IMF, and the subsidy
resources are nanced by contributions rom the IMF and a
broad spectrum o its member countries.
Box 3.1 Special Drawing Rights
t SdR is a rsrv ass cra b IMF i 1969 i
rsps ra a sra iraia
iqii. SdRs ar “aca”—isrib—
mmbrs i prpri ir IMF qas. Sic
SdR’s crai, a a SdR 21.4 bii as b
aca mmbrs—SdR 9.3 bii i 1970–72 a
SdR 12.1 bii i 1979–81.ta, SdR as
imi s as a rsrv ass. Is mai ci is
srv as i acc IMF a sm r
iraia raizais a a mas pam r
mmbrs i si ir IMF acia biais. t
SdR is ir a crrc r a caim IMF. Rar,
i is a pia caim r sab crrcis
IMF mmbrs. hrs SdRs ca bai s
crrcis i xca r ir SdRs i w was: rs,
r arram var xcas
bw mmbrs; a sc, b IMF’s sia-
i mmbrs wi sr xra psiis prcas
SdRs rm mmbrs wi wak xra psiis i
xca r r sab crrcis.
t va SdR is bas wi
avra vas a bask majr ira-
ia crrcis, a SdR irs ra is a
wi avra irs ras sr-rm
isrms i marks r crrcis i
vaai bask. t m vaai is
rviw vr v ars. t as rviw was
cmp i nvmbr 2005, a IMF exciv
Bar ci cas i vaai bask
civ Jaar 1, 2006. t SdR irs ra is
caca wk a prvis basis r
rmii irs cars rar IMF
aci a irs ra pai mmbrs aar crirs IMF.
Special Drawing Rights. The IMF can create international
reserve assets by allocating Special Drawing Rights (SDRs)
to members (Box 3.1). Recipient countries can use SDRs to
obtain oreign exchange rom other members and to makepayments to the IMF. SDRs are also the IMF’s unit o account.
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Cri acii(year adopted) prs Ciis phasig a mirig1
Cri rachs aex F Facii4
Sa-B Arrams (1952) Mim-rm assisac r cris Ap picis a prvi cfc Qarr prcass (isbrsms)wi baac pams icis a mmbr’s baac pa- ci bsrvac prr- a sr-rm caracr. ms icis wi b rsv mac criria a r ciis.
wii a rasab pri.
ex F Facii (1974) lr-rm assisac sppr Ap 3-ar prram wi src- Qarr r smiaa prcass(ex Arrams) mmbrs’ srcra rrms arss ra aa, wi aa ai (isbrsms) ci
baac pams icis a sam picis r x bsrvac criria a r-rm caracr. 12 ms. ciis.
Scia aciiisSppma Rsrv Sr-rm assisac r baac Avaiab i cx Sa-B Facii avaiab r ar; r-
Facii (1977) pams icis ra criss r ex Arrams wi a accss wi w r mr mark cc. asscia prram a wi prcass (isbrsms).
sr picis arssss mark cc.
Cmpsar Fiaci Mim-rm assisac r mp- Avaiab w sra/ tpica isbrs vr a miimmFacii (1963) rar xpr sras r cra xcss is ar b cr six ms i accrac wi
impr xcsss. ariis a a mmbr as pasi prvisis a arram wi ppr cri arram.rac ciiai, r w is
. baac pams psii xc-i sra/xcss is saisacr.
emrc Assisac Assisac r baac pams n, a ps-cfic assis-icis ra wi: ac ca b sm i w r
mr prcass.
(1) nara isasrs (1962) nara isasrs Rasab rs vrcmbaac pams icis.
(2) Ps-cfic (1995) t arma civi rs, Fcs isiia a amiis-piica rmi, r iraia raiv capaci bii pav arm cfic. wa war a ppr cri rac
arram r PRgF.
Faciiis r w-icm mmbrsPvr Rci a grw lr-rm assisac r p- Ap 3-ar PRgF arrams. Smiaa (r ccasia qarr
Facii (1999) sa baac pams i- PRgF-sppr prrams ar bas isbrsms ci bsrv-cis srcra ar; aims a a Pvry Rci Sray Papr ac prrmac criria assai pvr-rci rw. (PRSP) prpar b cr i a rviws.
paricipar prcss a iraimacrcmic, srcra, apvr rci picis.
exs Scks Facii (2006) Sr-rm assisac arss a Ap a 1–2 ar prram ivvi Smiaa r qarr isbrsmmprar baac pams macrcmic ajsms awi bsrvac prrmac criri a is a xs mmbr ajs sck a, i ms cass, cmpi sck. a srcra rrm csir a rviw.
impra r ajsm sck, r r miiai impac
r scks.
Table 3.1 IMF lending facilities
1 Except or the PRGF, the IMF’s lending is nanced rom the capital subscribed by member countries; each country is assigned a qa that represents its nancial commitment. A member provides a portion o its quota in oreign currenciesacceptable to the IMF—or SDRs (see Box 3.1)—and the remainder in its owncurrency. An IMF loan is disbursed or drawn by the borrower prcasi oreigncurrency assets rom the IMF with its own currency. Repayment o the loan isachieved by the borrower rprcasi its currency rom the IMF with oreign cur-rency. See CD-Box 5.1 on the IMF’s nancing mechanism. PRGF lending is nanced by a separate PRGF-ESF Trust.
2 The ra car on unds disbursed rom the General Resources Account (GRA) is set at a margin over the weekly interest rate on SDRs. The rate o charge is applied to the daily balance o all outstanding GRA drawings duringeach IMF nancial quarter. In addition, a one-time service charge o 0.5 percentis levied on each drawing o IMF resources in the GRA, other than reservetranche drawings. An up-ront commitment ee (25 basis points on committed amounts up to 100 percent o quota, 10 basis points thereater) applies to theamount that may be drawn during each (annual) period under a Stand-By or Extended Arrangement; this ee is reunded on a proportionate basis as subsequent
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Prram sppr | 3
Rrchas (ram) rms3
obigai excai
sch schAccss imis1 Chargs2 (Years) (Years) Isams
Aa: 100% qa; Ra car ps srcar 31 / 4–5 21 / 4–4 Qarrcmaiv: 300% qa. (100 basis pis ams abv
200% qa; 200 basis pis ams abv 300% qa).5
Aa: 100% qa; Ra car ps srcar 41 / 2–10 41 / 2–7 Smiaacmaiv: 300% qa. (100 basis pis ams abv
200% qa; 200 basis pis ams abv 300% qa).5
n accss imis; accss r Ra car ps srcar 21 / 2–3 2–21 / 2 Smiaaacii w accss r (300 basis pis, risi b 50 basisasscia rar arram pis a ar ar rs isbrsmw rwis xc ir a vr 6 ms rar aaa r cmaiv imi. maximm 500 basis pis).
45% qa ac r xpr a Ra car. 31 / 4–5 21 / 4–4 Qarrcra cmps. Cmbiimi 55% qa r bcmps.
gra imi 25% qa, Ra car; wvr, ra 31 / 4–5 n Qarr arr ams p car ma b sbsiiz 0.5 pr- appicab 50% ca b ma avaiab i c a ar, sbjc rsrcxcpia cass. avaiabii.
140% qa; 185% qa i 0.5% 51 / 2–10 n Smiaaxcpia circmsacs. appicab
Aa: 25% qa; 0.5% 51 / 2–10 n Smiaacmaiv: 50% qa appicabxcp i xcpia circmsacs.
drawings are made under the arrangement.
3 For purchases made ater November 28, 2000, members are expected to makerepurchases (repayments) in accordance with the schedule o expectation; the IMF may, upon request by a member, amend the schedule o repurchase expecta-tions i the Executive Board agrees that the member’s external position has not improved suciently or repurchases to be made.
4 Cri racs reer to the size o purchases (disbursements) in terms o propor-tions o the member’s quota in the IMF; or example, disbursements up to
25 percent o a member’s quota are disbursements under the rs credit trancheand require members to demonstrate reasonable eorts to overcome their bal-ance o payments problems. Requests or disbursements above 25 percent arereerred to as ppr credit tranche drawings; they are made in installments asthe borrower meets certain established perormance targets. Such disbursementsare normally associated with a Stand-By or Extended Arrangement. Access toIMF resources outside an arrangement is rare and expected to remain so.
5 Surcharge introduced in November 2000.
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Emerging Market Economies
Many emerging market economies have moved rom programs
to a surveillance-only relationship with the IMF. As these
countries have gained access to international capital markets,
they have repaid their IMF loans ahead o schedule and their
need or new IMF lending has decreased dramatically.
Lending
IMF credit outstanding at the end o FY2007 declined to
SDR 7.3 billion rom SDR 19.2 billion in April 2006, owing
to continued early repayments o outstanding loans and a low
level o new disbursements (Figure 3.1).36 During FY2007, nine
members—Bulgaria, the Central Arican Republic, Ecuador,
Haiti, Indonesia, Malawi, the Philippines, Serbia, and
Uruguay—repaid their outstanding obligations to the IMF
ahead o schedule, or a total o SDR 7.1 billion. IMF disburse-
ments totaled SDR 2.3 billion, the bulk o which went to Turkey.
New IMF commitments ell sharply, rom SDR 8.3 billion in
FY2006 to SDR 237 million in FY2007, with two new Stand-By
Arrangements approved or Paraguay and Peru. Seven Stand-By
and Extended Arrangements were in eect as o the end o
FY2007, o which our are being treated as precautionary since
borrowers have indicated their intention not to draw on them. At
the end o April 2007, undrawn balances under all current Stand-
By and Extended Arrangements amounted to SDR 3.9 billion.
The Fund can also provide loans under its lending acilities
through the Trade Integration Mechanism (TIM), which it
introduced in FY2004. The TIM is not a lending acility
itsel, but, rather, a policy. It is designed to help mitigate
concerns among some developing countries that their
balance o payments positions could suer, albeit temporar-
ily, as multilateral trade liberalization changes their competi-
tive position in world markets.
Detailed inormation about the amounts o lending
approved by the IMF, credit outstanding, and repayments,
broken down by lending acility and nancial year, can be
ound in the Appendix II tables on the CD-ROM.
The IMF’s Executive Board requently reviews and renes
the IMF’s policies and instruments to ensure that they meet
members’ evolving needs. During FY2007, the IMF’s
Executive Board began work on the development o a new
contingent nancing instrument that emerging market
countries active in international capital markets could draw
on i they experience a sudden, temporary loss o liquidity.
To help low-income countries avoid building up excessive
debt ater beneting rom debt relie, the Boards o the IMF
and the World Bank decided to strengthen the Debt
Sustainability Framework (DSF) developed by the twoinstitutions in 2005, and the IMF and the World Bank
engaged in outreach on ways to use the DSF more eec-
tively. The Board also reviewed the report o the
Independent Evaluation Oce (IEO; Box 5.3), “The IMF
and Aid to Sub-Saharan Arica,” concluded a review o “ex
post assessments”—assessments o the successes and ailures
o IMF-supported programs with repeat or longer-term
borrowers—and reviewed the IMF’s experience over 1992–
2005 with precautionary arrangements, which give countries
not acing immediate balance o payments problems the right
to draw on nancial assistance rom the IMF should the need
arise, conditional on the implementation o specic policies.
36 The IMF’s liquidity, as measured by the Forward Commitment Capacity (FCC), rose to an all-time high o SDR 126.1 billion at the end o April 2007, rom SDR 120.1 billion at the end o April 2006, largely because o the signicant decline in lending.
Figure 3.1 Regular loans outstanding, FY1997–FY2007
(In billions o SDRs)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
80
70
60
50
40
30
2010
0
Source: IMF Finance Department.
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37 “The Role o Fund Support in Crisis Prevention” (March 23, 2006) can be ound on the IMF’s Web site, www.im.org.
38 The summing up o the Board’s discussion is contained in PIN 06/104, which can be ound on the CD-ROM and on the IMF’s Web site, at www.im.org/external/np/sec/pn/2006/pn06104.htm. A act sheet about the Contingent Credit Lines can be ound at www.im.org/external/np/exr/acts/ccl.htm.The IMF introduced the CCL in 1999 as part o its response to the rapid spread o turmoil through global nancial markets during the Asian crisis o 1997–98. The instrument was intended to provide a precautionary line o deense or members that had sound policies and were not at risk o an external payments crisis o their own making, but that were vulnerable to contagion eects rom capital account crises in other countries. Despite changes intended to make the CCL more attractive to members, it was never used, and the Board decided in 2003 to allow it to expire.
39 The sta paper, “Further Consideration o a New Liquidity Instrument or Market Access Countries—Design Issues,” February 13, 2007, can be ound on the IMF’s Web site, at www.im.org/external/pp/longres.aspx?id=4044.The summing up o the Board’s discussion, PIN 07/40, can be ound on the CD-ROM as well as on the Fund’s Web site, at www.im.org/external/np/sec/pn/2007/pn0740.htm.
New fnancing instrument
A number o the IMF’s members have called or consideration
o a new nancing instrument designed specically to support
crisis-prevention eorts by members active in internationalcapital markets. As part o the analytical backdrop to the
design o such an instrument, in May 2006 the Executive
Board held an inormal seminar to discuss a study on the role
o IMF-supported programs in crisis prevention.37 Based on
theoretical and empirical work, that study ound that the
availability o IMF resources can have a signicant impact on
lowering the likelihood o a crisis. Moreover, the marginal
impact o IMF support depends on the quality o the
member’s policies and economic undamentals—accordingly,
the availability o IMF nancial resources can have a strong
complementary eect to the member’s own crisis-prevention
eorts. Building on this analytical work, at a seminar in
August 2006, the Executive Board discussed the objectives or
a new nancing instrument, taking into account the IMF’s
experience with an earlier instrument, the Contingent Credit
Lines (CCL).38
A successul instrument would reduce the risk o a crisis by
granting qualied members—that is, countries ollowing
sound policies—access to a credit line, thereby lowering the
incentive or private investors to reduce their exposure early,
at the rst sign o trouble. It would also need to balance
predictable access to IMF nancing against adequate
saeguards or IMF resources, and manage the tension
between the provision o strong positive signals when
conditions are good and the possibility that entry or exit rom
the instrument could generate negative signals when circum-
stances deteriorate.
At the September 2006 Annual Meetings, the IMFC
requested that the IMF continue to work on designing a new
instrument, tentatively called the Reserve Augmentation
Line. Outreach by IMF management and sta with ocials
and market participants acilitated urther work on the
instrument’s design, and in March 2007 Executive Directors
discussed a paper that sought urther convergence o views on
key design issues, such as qualication, monitoring, access,
terms, and a sunset clause.39 The discussion claried areas o
emerging common ground and revealed areas where urther
progress is needed. The Executive Board called on IMF sta
to prepare a ollow-up paper rening the proposals.
Low-Income Countries
The MTS identies the need to make the IMF’s engagement
with low-income countries more fexible, as well as more
ocused on what is essential and on areas where the IMF has a
comparative advantage and expertise. Over the past ew years,
the Board has approved a wide array o instruments to help
the IMF’s low-income members achieve macroeconomic
stability and sustainable growth, which are critical to the
achievement o the Millennium Development Goals (Box
3.2). In addition to the advice given to countries in the course
o its surveillance activities, the IMF provides advice, nancial
assistance, and debt relie in connection with the acilities
described above, and 90 percent o its technical assistance goes
to low- and lower-middle-income countries (see Chapter 4).
For low-income countries eligible or PRGF lending that do
not want nancial assistance rom the IMF but do want
support o their policies through counsel and advice, the IMF
created the Policy Support Instrument (PSI) in FY2006. As o
April 30, 2007, our countries had applied or and received
PSIs. The Fund also continues to advocate a successul
outcome to the Doha Round o trade negotiations (Box 3.3).
Concessional lending
During FY2007, the Executive Board approved 10 new PRGF
arrangements (Table 3.2), with commitments totaling
SDR 401.2 million. The Board also approved the augmenta-
tion o two PRGF arrangements, or a combined total o
SDR 36.8 million. In addition, the Board approved Kenya’s
request to reduce access under its PRGF arrangement by
SDR 75 million, in light o its improved external position. As
o April 30, 2007, the reorm programs o 29 member
countries were supported by PRGF arrangements. Total
concessional loans outstanding amounted to SDR 3.9 billion
(Figure 3.2). To date, no country has requested assistance
under the ESF.
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Table 3.2 PRGF arrangements approved in FY2007
(In millions o SDRs)
AmMmbr eciv a arv1
nw arragms
Aaisa J 26, 2006 81.0
Brkia Fas Apri 23, 2007 6.0
Cra Arica Rp. dcmbr 22, 2006 36.2
gambia, t Fbrar 21, 2007 14.0
haii nvmbr 20, 2006 73.7
Maaascar J 21, 2006 55.0
Mariaia dcmbr 18, 2006 16.1
Mva Ma 5, 2006 80.1
Rwaa J 12, 2006 8.0
Sirra l Ma 10, 2006 31.1
Sba 401.2
Agmais/rcis
Brkia Fas Spmbr 8, 2006 6.0
Mva dcmbr 15, 2006 30.8Ka Apri 11, 2007 (75.0)
Sba (38.2)
ta 363.0
Source: IMF Finance Department.
1 For augmentations/reductions, only the amount o the increase/decreaseis shown.
Debt relie
Debt relie eorts under the enhanced HIPC Initiative and
the MDRI continued during FY2007. A sunset clause was
introduced at the start o the HIPC Initiative in 1996,
restricting eligibility to countries that had embarked onprograms supported by the IMF or the International
Development Association (IDA)40 within a two-year period to
prevent the Initiative rom becoming permanent, minimize
potential moral hazard arising rom excessive borrowing in
anticipation o debt relie, and encourage early adoption o
reorms. Following numerous extensions over the years, at a
meeting in September 2006 the Executive Boards o the IMF
and the World Bank acknowledged that letting the sunset
clause take eect at end-2006 without any modication could
leave several countries with debt burdens in excess o the
Initiative’s thresholds and no urther possibility o beneting rom this comprehensive ramework. Accordingly, agreement
was reached to let the sunset clause take eect while granda-
thering all countries assessed to have met the income andindebtedness criteria based on end-2004 data, including
countries that might be assessed to have met these criteria at
some point in the uture.
Executive Directors called on the sta to conduct a stock-
taking exercise in a ew years’ time to review the options or
the remaining duration o the HIPC Initiative. They also
urged sta to continue working with country authorities to
develop and implement reorm strategies and to assist these
countries in qualiying or HIPC Initiative assistance
promptly. At the same time, they encouraged the remaining
countries to make every eort to establish a track record o policy perormance and implement satisactorily their
poverty reduction strategies so that they can begin receiving
debt relie.41
As o April 30, 2007, 30 countries had reached the decision
point under the enhanced HIPC Initiative; o these, 22 had
reached their completion points.42 The IMF has committed
SDR 1.9 billion under the HIPC Initiative and disbursed
SDR 1.7 billion. During FY2007, one member (Haiti) reached
its decision point, three others (Malawi, Sierra Leone, and São
Tomé and Príncipe) reached their completion points, and
Aghanistan was added to the list o countries eligible orassistance under the HIPC Initiative.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
8
7
6
5
4
3
2
1
0
Source: IMF Finance Department.
MdRIbri
Figure 3.2 Concessional loans outstanding,FY1997–FY2007
(In billions o SDRs)
40 IDA is the World Bank agency that provides interest-ree loans and grants to the poorest member countries.
41 For the summing up o the Board’s discussion, see “IMF Executive Board Discusses Issues Related to the Sunset Clause o the Initiative or Heavily Indebted Poor Countries,” PIN 06/107, on the CD-ROM or at www.im.org/external/np/sec/pn/2006/pn06107.htm.
42 To qualiy or HIPC assistance, a country must pursue strong economic policies supported by the IMF and the World Bank. Ater establishing a track record o good perormance and developing a PRSP or an interim PRSP, the country is said to have reached its decision point, at which time the IMF and the World Bank ormally decide on the country’s eligibility and the international community commits itsel to reducing the country’s debt to a sus- tainable level. The country must then continue its good track record with the support o the international community, implementing key policy reorms,maintaining macroeconomic stability, and adopting and implementing a PRSP. Paris Club and other bilateral and commercial creditors reschedule obligations coming due. A country reaches its completion point once it has met the objectives set at the decision point. It then receives the balance o the debt relie committed.
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43 For more inormation on the MDRI, see PIN 05/164, at www.im.org/external/np/sec/pn/2005/pn05164.htm.
Box 3.2 Tracking progress toward the Millennium Development Goals
1 t gba Miri Rpr: Cri Cas gr eqai a Frai Sascan be ound on the IMF’s Web site, at www.im.r/xra/pbs/ca/rs.cm?sk=20364.0.
t IMF a Wr Bak rack prrss mab w-icm cris war acivm
Miim dvpm gas (Mdgs), ji
pbisi ir is aa i Global
Monitoring Report (gMR). t r gMR, iss
i Apri 2007, a prrss rs a—
avi pvr b 2015—was rack i a
vpi ris xcp sb-Saara Arica, b
a rs aai as rci ci
mrai a isas a acivi virma
ssaiabii wr ai sr. I ca r rar
ai r qai— bcas
qi csirais b as bcas mpwri
wm is ssia cmic w-bi a
avacm r Mdgs—a raisas, wic acc r 27 prc vp-
i wr’s xrm pr (s ivi ss a
$1 a a).1 Frai sas—w-icm cris a
rriris m av spcia wak isiis
a vrac a rmi cmic prr-
mac a ivr basic scia srvics—ar,
i ra, as ik aciv Mdgs. Ma
ar mri rm cfic.
A sbsaia icras i ai wi b i
vpi cris ar accra ir rs
rac Mdgs. hwvr, aca cmmims
ai i 2005–06 as risr b oeCd-dAC
(oraizai r ecmic Cprai advpm–dvpm Assisac
Cmmi)—xci xcpia b ri
rasacis—av ci, a prjcis
r 2008 av ai vms ai w sr
ps ma b iraia cmm-
i a Iraia Crc Fiaci
r dvpm a k pac i Mrr,
Mxic, i 2002, a a grp 8’s
gas smmi i 2005. t IMF cis
r biara rs icras ai vs a
mak ai mr pricab. t F is as
prvii avic a cica assisac i is
aras xpris ai rcipis sr a
ca s icras ai civ wirmii macrcmic sabii, crwi
priva ivsm, r ai back i
siais ssaiab xra ibss.
t IMF wrks cs wi Wr Bak ma
isss ra w-icm cris i aii
gMR, ici PRSP prcss, b ri
r hIPC Iiiaiv a MdRI, db
Ssaiabii Framwrk, a Fiacia Scr
Assssm Prram ( FSAP is scrib i
Capr 2). A exra Cmmi carri a
s Bak-F cabrai, wic is iscss
i Capr 5, ri Fy2007.
tion point under the enhanced HIPC Initiative. In addition,
the IMF provides MDRI debt relie to all its members with
yearly per capita incomes at or below $380 (including two non-
HIPCs, Cambodia and Tajikistan).43
As o Apri l 30, 2007, the IMF had delivered MDRI debt
relie totaling SDR 2.7 billion to 24 countries. The debt relie was nanced by a combination o resources rom undisbursed
The MDRI was launched in early 2006 to urther reduce the
debts o qualiying low-income countries and provide them
with additional resources to help meet the MDGs. Proposed by
the Group o 8 countries, the MDRI is a dierent mechanism
rom the HIPC Initiative but linked to it operationally. Under
the MDRI, the IMF, IDA, the Arican Development Fund, and
the Inter-American Development Bank provide 100 percentdebt relie on eligible claims o countries reaching the comple-
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Box 3.3 Trade liberalization and low-income countries
1 The paper is available on the IMF’s Web site, at www.im.r/xra/pp/rs.aspx?i=3886; PIN 06/105, which contains the summing upo the Board’s discussion, can be ound on the CD-ROM or at www.im.r/xra/p/sc/p/2006/p06105.m.
2 The recommendations include the establishment o a new executive secretariat in the WTO Secretariat, measures to strengthen capacity inthe least-developed countries, a unding target o $400 million over an initial fve-year period, and a monitoring and evaluation ramework.
I As 2006, exciv Bar iscss
“da dvpm Aa a Ai r tra,” a
papr ji prpar b sas IMF a
Wr Bak.1 exciv dircrs srss a wrk
Ai r tra s prc rarss sas
da R. A Ai r tra ca
sbsi r a ambiis cm da
R, b pi vpi cris arss
irasrcra a r spp csrais, i ma
ab m ak avaa ra ppri-
is arisi rm ba mark pi. t IMF
s ci wi sciv irvis wii is
maa a cr aras cmpc, ici
macrcmic impicais cas i rapicis a ba ra virm, a avic
ax a csms rrm.
t Bar k prpsas Wto task
Frcs a eac Ira Framwrk r
tra-Ra tcica Assisac (IF) a Ai r
tra. A prs, ra-ra pririis i ma
as-vp cris rmai iscc
rm PRSP prcss. Aais is backr,
exciv dircrs bsrv a impmai
rcmmais IF task Frc c aw
IF pa a mr civ r i pi ii
ai-r-ra s a criai ra-ra
cica assisac. t wcm rcmma-
is r sr capaci i IF bciar
cris a imprv IF vrac, a rciz
r cmmims r aci is r.2
A bs ra ibraizai wi
css vra, crai w-icm cris ma b
r i sr r b ra ibraizai masrs
a xps ir xprs rar cmpii,
rc ir rvs as aris ar wr, r rais
cs imprs as aricra sbsiis ar
abis. I 2004, IMF irc tra
Irai Mcaism (tIM), a vic a aws
cris icras ir accss IMF rsrcs
r a xisi arram r a w arram
wii F’s aciiis i cssar cp
wi rsi ra prrcs a c
r cris’ ra ibraizai ir baac
pams. I Fy2007, exciv Bar apprv
acivai tIM r Maaascar, i i
pssib impac cr’s xi xprs
xpirai xi qas i 2005 as ca r b
Wto’s Arm txis a Ci a
impmai u.S. Arica grw a
oppriis Ac i 2007. Wi acivai
tIM, Maaascar bcam iib r a amai
accss IMF rsrcs r is PRgF arra-
m. I is ir IMF mmbr r wic tIM as
b aciva.
HIPC accounts (SDR 0.4 billion), IMF resources (SDR 1.2 bil-
lion), and bilateral contributions (SDR 1.1 billion). During
FY2007, our members (Malawi, Mauritania, Sierra Leone,
and São Tomé and Príncipe) received debt relie totaling
SDR 189.2 million under the MDRI.44
Debt Sustainability Framework
The primary aim o the DSF is to help guide the borrowing
decisions o low-income countries, balancing their need or unds
against their ability to service debt. The Executive Board had a
second discussion in FY2007 about how the DSF, which was
44 CD-Table 3.3 and CD-Table 3.4 on the CD-ROM list the countries covered by the MDRI and describe the implementation o the MDRI.
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45 The rst discussion took place in April 2006; see PIN 06/61, at www.im.org/external/np/sec/pn/2006/pn0661.htm.
46 For the summing up o the Board’s discussion, see PIN 06/136, “IMF Executive Board Discusses the Application o the Debt Sustainability Framework or Low-Income Countries Post Debt Relie” on the CD-ROM or at www.im.org/external/np/sec/pn/2006/pn06136.htm.The sta report can be ound on the IMF’s Web site, at www.im.org/external/pp/longres.aspx?id=3959; a sta guidance note on the application o the DSF is also posted on the IMF’s Web site, at www.im.org/external/np/pp/2007/eng/041607.pd.
47 See www.im.org/external/pubs/t/dsa/lic.aspx o r debt sustainability analyses included in country reports. The Web page on the IMF’s concessionality was launched in January 2007; see www.im.org/external/np/pdr/conc/index.htm.
48 See PIN 05/145 at www.im.org/external/np/sec/pn/2005/pn05145.htm o r the summing up o the Board discussion at which the PSI was approved.
endorsed by the Boards o the IMF and the World Bank in April
2005, could be used to help low-income countries that have
received debt relie avoid reaccumulating excessive debt.45 The
November 2006 discussion, which was based on a paper prepared jointly by the stas o the IMF and the World Bank, ocused on
how best to integrate into the DSF the policy challenges arising
rom the perceived increase in borrowing space created by debt
relie in some low-income countries, the emergence o new
creditors, and the rising weight o domestic debt. These develop-
ments, while welcome, create new risks that need to be addressed
as countries make progress toward implementing prudent debt-
management policies. The Board thereore called or improve-
ments to the rigor and quality o debt sustainability analyses.
Executive Directors reiterated that concessional fows remain
the most appropriate source o external nance or low-incomecountries and called or continued eorts by the international
community to improve the availability and predictability o
such nancing. However, they recognized that consideration
should be given, on a case-by-case basis, to nonconcessional
nance, depending on its impact on debt sustainability, on the
overall strength o a borrowing country’s policies and institu-
tions, and on the quality o both the investment to be nanced
and the overall public expenditure program.
Executive Directors underscored that the eectiveness o the
DSF ultimately depends on its broader use by debtors and
creditors and stressed the need or urther outreach to ocial
creditors. They also stressed the importance o timely, high-
quality data on borrowing and lending operations and
encouraged IMF sta, working with Bank sta, to dissemi-
nate more broadly and eectively the results o debt sustain-
ability analyses.46 The Board welcomed the creation o a
dedicated Web page on the IMF’s Web site where debt
sustainability analyses can be easily located and supported the
establishment o a similar Web page on concessionality.47 The
IMF and the World Bank have stepped up their outreach on
the DSF, including to non-OECD creditors, to oster
responsible lending practices, and they stand ready to help
design principles in this area. They are also increasing eorts
to provide borrowing countries with training and technical
assistance to strengthen their debt-management capacities.
Policy Support Instrument
In recent years, several low-income countries have made
signicant progress toward economic stability and no longer
require IMF nancial assistance. However, regardless o whether
they seek the Fund’s nancial support, they may still seek IMF
monitoring and support o, and advice and counsel on, their
economic policies. Approved by the Executive Board in
FY2006, PSIs are designed to address the needs o these
members by providing policy support and “signaling.”48
Signaling reers to the inormation Fund activities can
indirectly provide about countries’ perormance and prospects.
Such inormation can be used to inorm the decisions o
outsiders, including private creditors, ocial donors and
creditors, and the public at large. In low-income countries, such
signals have been sent mainly in the context o the PRGF and
the related PRSP process. PSIs mirror the design and achieve
many o the purposes o the PRGF, and like PRGF arrange-
ments and debt relie, are based on development o a PRSP.
They are also voluntary—members that want PSIs must request
Agricultural worker in Tajikistan
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49 For details, see Press Releases 06/172, “IMF Executive Board Approves a Three-Year Policy Support Instrument or Cape Verde,” and 07/13, “IMF Executive Board Completes the First Review Under the Policy Support Instrument or Cape Verde,” at www.im.org/external/np/sec/pr/2006/pr06172.htm an d
www.im.org/external/np/sec/pr/2007/pr0713.htm, respectively; Press Releases 05/229, “IMF Executive Board Approves a Two-Year Policy Support Instrument or Nigeria,” and 06/293, “IMF Executive Board Completes the Second Review Under the Policy Support Instrument or Nigeria,” at
www.im.org/external/np/sec/pr/2005/pr05229.htm an d www.im.org/external/np/sec/pr/2006/pr06293.htm, respectively; Press Release 07/26,“IMF Executive Board Completes Sixth Review Under Tanzania’s PRGF Arrangement and Approves a Three-Year Policy Support Instrument,” at
www.im.org/external/np/sec/pr/2007/pr0726.htm; and Press Releases 06/14, “IMF Executive Board Completes Final Review o Uganda’s PRGF Arrangement and Approves 16-Month Policy Support Instrument,” and 06/281, “IMF Executive Board Completes the First Review Under the Policy Support Instrument or Uganda and Approves a New Three-Year Policy Support Instrument,” at www.im.org/external/np/sec/pr/2006/pr0614.htm and www.im.org/external/np/sec/pr/2006/pr06281.htm, respectively.
50 The IEO’s report and press release, as well as the summing up o the IMF Board’s discussion, can be ound at www.ieo-im.org/eval/complete/eval_03122007.html.
them—and thus demonstrate strong country ownership o
policy programs, and programs are expected to meet the same
high standards as programs supported by Fund nancial
assistance. In the event o a shock, an on-track PSI couldprovide the basis or rapid access to PRGF resources through
the ESF. The publication o PSI documents, like that o PRGF
documents, is voluntary but presumed.
Emergency Assistance
The IMF provides emergency nancial assistance to both
emerging market economies and low-income countries
recovering rom conficts (Emergency Post-Confict Assistance,
or EPCA) or natural disasters (Emergency Natural Disaster
Assistance, or ENDA). The interest charged on Emergency
Assistance provided to PRGF-eligible members is subsidized
subject to the availability o subsidy resources contributed by
member countries; the subsidized rate is 0.5 percent a year.
During FY2007, the Executive Board approved Emergency
Assistance o SDR 50.8 million or Lebanon under EPCA, and
the Central Arican Republic and Haiti repaid their EPCA loans,
totaling SDR 33 million, earlier than scheduled. As o April 30,
2007, two countries, Iraq and Lebanon, had outstanding EPCA
credit, which amounted to SDR 347.9 million. No new ENDA
loans were made during FY2007. During FY2007, Malawi repaid
ENDA loans totaling SDR 8.7 million. Three countries—
Grenada, Maldives, and Sri Lanka—had outstanding ENDA
credit, or a total o SDR 111.5 million, at end-April 2007.
Review o the IMF’s Role and Instruments
In FY2007, the Executive Board reviewed the IMF’s advice on
the use o aid in sub-Saharan Arica, based on an IEO evaluation;
considered the ndings and value o ex post assessments; and
compared the perormance o countries under precautionary
arrangements with that o countries that had arrangements on which they drew nancial assistance. The Board also requested
additional policy papers to dene more clearly the IMF’s role in
low-income countries.
IMF and aid to sub-Saharan Arica
In March 2007, the Executive Board discussed the IEO evaluation
o the IMF and aid to sub-Saharan Arica.50 The IEO report
conrmed the steady improvement in the region’s macroeconomic
perormance during 1999–2005 and attributed this improvement
in part to the advice and actions o the IMF, including on debt
relie, while also recognizing the contribution o the authorities’
own eorts and exogenous actors. Nevertheless, the report
The IMF provides emergency
nancial assistance to emerging
market economies and low-income
countries recovering rom conficts
or natural disasters.
In addition to promoting a close policy dialogue between
the IMF and its low-income members, PSIs provide more
requent Fund assessments o members’ economic andnancial policies than is possible under the Article IV
consultation process: while Article IV consultations usually
take place yearly, the Board reviews perormance under PSIs
semiannually. Members with PSIs are expected to provide
timely and accurate data to the Fund to ensure the integrity
o these assessments.
In the past two years, the Board has approved PSIs or our
countries: Nigeria and Uganda in FY2006, and Cape Verde
and Tanzania in FY2007.49 In FY2007, the Board reviewed
Uganda’s 16-month PSI and approved a new, 3-year PSI at
Uganda’s request.
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identied areas where urther improvements were needed,
including the IMF’s role in poverty reduction eorts, the
mobilization o aid, the preparation o alternative scenarios or
reaching the MDGs, and the application o poverty and social
impact analysis. The IEO ound that IMF sta did not receive
clear directives on work in these areas because o dierences in the
views o Executive Directors on the IMF’s role and policies in low-
income countries, and that management and the Board should
have done more to resolve these dierences. The report also ound
a disconnect between the IMF’s external communications on aidand poverty reduction and its practice in low-income countries.
The IEO made the ollowing recommendations: (1) the Executive
Board should clariy IMF policies on macroeconomic perormance
thresholds or the accommodation o additional aid, the mobiliza-
tion o aid, alternative scenarios, poverty and social impact analysis,
and pro-poor and pro-growth budget rameworks; (2) IMF
management should establish transparent mechanisms or
monitoring and evaluating the implementation o the claried
policy guidance, including with respect to collaboration with the
World Bank, and ensure that institutional communications are
consistent with Fund policies and operations; and (3) management
should clariy its expectations o, and the resources available to, the
IMF’s resident representatives and mission chies with respect to
their interactions with local donor groups and civil society.
In their discussion o the IEO’s report, Executive Directors were
encouraged by the improvements in sub-Saharan Arica’s
macroeconomic perormance. They noted that the HIPC Initiative
and the MDRI had greatly reduced debt-related vulnerabilities and
the costs o debt servicing. Executive Directors also noted the
improvements in the IMF’s assistance to low-income countries.They considered that the IMF’s engagement in low-income
countries should remain ocused on its core mandate and that the
IMF should not play a coordinating role in aid mobilization. They
also conrmed that distributional policies lie outside the IMF’s
core mandate and emphasized the importance o improving IMF
collaboration with development partners, in particular the World
Bank, to take these issues into account when helping countries
ormulate their macroeconomic policies. Many Executive Directors
thought sta should be prepared to design alternative scenarios
related to the scaling-up o aid, but most thought that normative
advice would all outside the IMF’s mandate: they considered that
the IMF’s role should be limited to assessing the consistency o
Post-confict reconstruction in Lebanon
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51 The paper can be ound on the IMF’s Web site, at www.im.org/external/np/pp/eng/2006/032006R.pd. The summing up o the Board discussion can be ound in PIN 06/96, on the CD-ROM, as well a s on the IMF’s Web site, www.im.org/external/np/sec/pn/2006/pn0696.htm.
52 These EPAs were or the ollowing countries: Albania, Armenia, Azerbaijan, Benin, Bolivia, Bulgaria, Cambodia, Cameroon, Chad, Ethiopia,The Gambia, Georgia, Guinea, Guinea-Bissau, Honduras, Kazakhstan, the Kyrgyz Republic, Lesotho, the ormer Yugoslav Republic o Macedonia,Madagascar, Malawi, Mali, Moldova, Mozambique, Niger, Peru, Romania, Sierra Leone, Uganda, Uruguay, Vietnam, Zambia.
53 PIN 06/94, which contains the ull summing up o the Board discussion, can be ound on the CD-ROM and on the IMF’s Web site, at www.im.org/external/np/sec/pn/2006/pn0694.htm.
additional aid fows with macroeconomic stability and the
absorption capacity o the country. The Board supported the
report’s recommendation on the need or urther clarication o
IMF policy and asked sta to come back with specic proposals inthis area. Early in FY2008, Fund management submitted its plan
or implementing Board-endorsed recommendations to the Board.
Ex post assessments
Ex post assessments (EPAs) provide the IMF with an opportunity
to step back rom ongoing longer-term program engagement
with a member country so that it can take a resh look at its
overall strategic approach and draw lessons or uture programs.
In May 2006, the Executive Board discussed the IMF sta’s
“Review o Ex Post Assessments and Issues Relating to the Policy
on Longer-Term Program Engagement.”51 Through May 15,
2006, 57 members had been identied as having longer-termprogram engagement, o which more than 80 percent were low-
income countries, and 42 EPAs had been completed. The IMF
introduced EPAs in 2003 in response to the IEO’s report on
prolonged use o Fund resources because o concerns that, in
some cases, longer-term program engagement might indicate
inadequate progress in dealing with members’ economic
problems and a lack o eectiveness o IMF-supported programs.
There were also concerns that longer-term program engagement
might hinder the development o domestic institutions,
undermine the Fund’s credibility, and decrease the resources
available to other members in need o support.
In their May 2006 discussion, Executive Directors reviewed the
ndings o 32 EPA reports completed by end-August 2005.52
In most cases, EPAs ound that the design o policies in IMF-
supported programs had been consistent with the multiple
macroeconomic and structural challenges aced by members
with longer-term program engagement, and that IMF
involvement had not undermined members’ institutional
development. The Board noted, however, that several EPAs had
been critical o the design o structural reorms, in terms o
both the scope and the number o structural conditions, and
that eorts to streamline conditionality should continue.
The Board considered that, by and large, EPAs have served their
purpose and remain an important institutional mechanism or
distilling lessons and enhancing the learning culture o the IMF.
However, their value could be enhanced by greater selectivity and
ocus on a ew critical issues. Executive Directors suggested that
systematic discussions in EPAs o the reasons or program success
or ailure and o potential exit strategies would provide urther
useul lessons and generally agreed that, the IMF’s budget
situation permitting, the sta should expand eorts to reach outand consult with donors, outside experts, and country authori-
ties, while saeguarding the condentiality o inormation.
Precautionary arrangements
Also in May 2006, the Board discussed a study by IMF sta
comparing precautionary programs with lending programs on
which borrowing countries intend to draw. The study was
undertaken at the Board’s request to determine whether there were
systematic dierences in terms o program policies, conditionality,
or macroeconomic outcomes, and, i so, whether such dierences
were attributable to the nature o the program or to the circum-
stances that had led the member to seek the IMF’s support.Executive Directors concurred that drawing programs were more
likely to be requested by members with weaker macroeconomic
perormances, whereas precautionary programs tended to be
requested by members that had stronger macroeconomic
undamentals but aced uncertainties.53 It was also recognized that
members used precautionary programs to signal policies to
markets. The Board noted that, in the rst program year, output
growth was signicantly higher, and infation signicantly lower,
in members with precautionary programs than in those with
drawing programs. However, these dierences could be explained
largely by the dierences in initial conditions. Executive Directors
welcomed the analysis o market reactions, as refected in interestrate spreads, to IMF-supported programs. Spreads did not widen
when members sought precautionary programs, suggesting that
markets did not attach a stigma to such programs.
Executive Directors expressed a variety o views on the role o
precautionary arrangements in supporting a successul exit or
members rom IMF-supported programs. They considered that all
IMF-supported programs should aim to achieve an exit rom IMF
nancing. Overall, Executive Directors agreed that precautionary
programs are a most useul instrument in the IMF’s toolkit,
lending the IMF’s credibility in support o the authorities’ policies
and enhancing policy discipline. Many Executive Directors also
considered that these programs send a well-calibrated signal to
markets o the authorities’ commitment. Comparisons o policy
objectives and conditionality between precautionary and non-
precautionary programs suggested to most Executive Directors
that IMF policies are being applied consistently.
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Chapter 4
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The technical assistance and training oered by the IMF at the request o member countries are
intended to help them ulll the commitments they make when they join the IMF—to pursue
policies that oster nancial and macroeconomic stability, sustainable economic growth, and
orderly exchange rate arrangements, and to provide the IMF with timely, accurate, and high-
quality data about their economies. Equally important, technical assistance and training are also
vehicles or helping member countries implement the recommendations that come out o the
IMF’s Article IV consultations (see Chapter 2). Hence, aligning and integrating capacity building
with surveillance and program work have become key objectives o the IMF’s Executive Board,
which regularly reviews Fund technical assistance and training.
The IMF oers technical assistance and training mainly in its core areas o expertise, including
macroeconomic policy, tax and revenue administration, public expenditure management, mone-
tary policy, exchange systems, nancial sector reorms, and macroeconomic and nancial statistics.
In recent years, member countries have also increasingly requested assistance in addressing issues
related to monitoring oshore nancial centers, preventing money laundering and the nancing
o terrorism, strengthening public investment, managing scal risks rom public-private partner-
ships, adopting international standards and codes or data and nancial and scal management,
correcting weaknesses identied under the joint IMF–World Bank Financial Sector Assessment
Program, and carrying out debt sustainability analyses.
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Chapter 4 Capacity building: technical assistance and training
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The amount o technical assistance and training delivered
directly to member countries by the IMF has increased
over the past ve years with the expansion o the regional
technical assistance and training centers. Taking manage-ment and administration into account, technical assistance
now represents about 24 percent o the IMF’s operating
budget. Still, demand or technical assistance and training
exceeds the IMF’s ability to supply it, especially in light o
constraints stemming rom growing pressures on the IMF’s
nances. Priority is thereore given to initiatives that
support the IMF’s core objectives.
IMF technical assistance is delivered mainly by the
Monetary and Capital Markets Department (MCM),
Fiscal Aairs Department (FAD), Statistics Department
(STA), and Legal Department (LEG). Overall institutionalpolicy on, and coordination o, technical assistance are the
responsibility o the Committee on Capacity Building,
assisted by the Oce o Technical Assistance Management
(OTM), in consultation with other IMF departments.
Following up on the IMF’s Medium-Term Strategy, the
Committee on Capacity Building is charged with ensuring
that the IMF’s initiatives in this area respond to country
needs, are coordinated with other providers, and are
guided by appropriate policies, while OTM is responsible
or raising and managing external nancing or technical
assistance activities and policy support. Training activities
are handled primarily by the IMF Institute, whichconducts seminars, workshops, and other training events
or country ocials, oten in collaboration with other
IMF departments.
Recognizing the critical capacity-building needs o develop-
ing countries, the IMF in FY2007 opened a regional
technical assistance center (RTAC) in Gabon to support
countries in Central Arica—the third such center in Arica
and the sixth worldwide (Box 4.1)—as well as a seventh
Regional Training Center (RTC) program, in India.
Technical Assistance
While the IMF may help identiy areas o need, it is the
member country that decides to request technical assistance.
Most technical assistance is provided ree o charge. Whethertechnical assistance is delivered through missions rom
headquarters, short-term expert assignments, long-term
resident advisors, or regional centers, the recipient country is
always ully involved in selecting, implementing, monitoring,
and evaluating the assistance it receives. This collaborative
approach strengthens country ownership o reorms.
Regional training center or Latin America
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Box 4.1 Regional Technical Assistance Centers
t RtACs ar cabraiv vrs bw IMF,
rcipi cris, a biara a miara
rs. Fiacia sppr r m cms rm
rs, a, i ma isacs, rcipi cris
msvs, as w as rm IMF. hs vrms
rq prvi i-ki cribis.
t RtACs wr riia cciv prvi
cica assisac sma isa cmis,
bcas iivia assisac prvirs, ici
IMF, wr ar prss m s cris’
rqss. t Pacic RtAC, rs, was sabis
i 1993 srv 15 isa ais. Bii is
sccss, r RtACs s w, a ar ar six RtACs wrwi.
t Caribba RtAC (CARtAC), sabis i 2003,
srvs 20 cris. t eas AFRItAC, sabis i
dar-s-Saaam, tazaia, i 2002, a Ws
AFRItAC, sabis i Bamak, Mai, i 2003,
r srv 17 cris. t w Cra
AFRItAC, wic p i librvi, gab, i
Fy2007, srvs six cris Cra Arica
ecmic a Mar Cmmi (CeMAC)—
Camr, Ca, Cra Arica Rpbic,
Rpbic C, eqaria gia, a gab—
as w as Bri a dmcraic Rpbic C. t Mi eas RtAC, sabis i 2004,
srvs 10 cris a rriris i Mi eas,
primari wi cica assisac ra rbii
ir cmis as mr rm cfic.
t rwi cs ria imsis
IMF cica assisac is i i wi xpasi
IMF’s ria srviac aciviis as ra
a acia irai—a pssibii
spivrs—icras. I aii, RtACs aciia
criai wi r cica assisac
prvirs, cra sari ria
xprics, a sr vpm ria
wrks xprs. I is rviw RtACs i
Fy2006, IMF’s exciv Bar cc a
wr a s aii F’s cica
assisac prram a a ir prsc i
a ab avaas—i paricar,
sri cris’ wrsip ir
cica assisac prrams a prvisi
rapi a fxib cica assisac.
t vm cica assisac, masr i
prs-ars, ivr r RtACs as ris
vr ar sic Fy2002, b i abs rms a
as a prpri a IMF cica assisac (s
Cd-tab 4.1, Cd-RoM). Sic sabis-m eas a Ws AFRItACs, aa
vm IMF cica assisac a raii
prvi i sb-Saara Arica as icras b
ams 30 prc.
t RtACs ar sa b ams rsi xprs,
sppm b sr-rm spciaiss, w
prvi capaci-bii assisac r
avisr srvics a raii i cr aras
IMF’s xpris, ici b maam,
acia scr pic, rv amiisrai,
pbic acia maam, a macrcmic
saisics. t Sri Cmmis a vr RtACs s crs’ sraic irci a
rviw ri wrk pas, prmi sr
cr wrsip crs msvs a
cica assisac ivr r m.
CARtAC is a ui nais dvpm Prram
prjc i wic IMF is a siar; rs
ar IMF prais r wic IMF as s
i rm rs.
dais cris srv b RtACs,
rs r ir RtACs, a s
xpris rsi avisrs ca b
Cd-RoM, i Cd-tab 4.2.
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Ninety percent o IMF technical assistance is provided to
low- and lower-middle-income countries (Table 4.1), to
help them build the institutions and capacity needed to
implement growth-enhancing policies. Technical assistancedelivery trends in FY2007 are summarized in Table 4.2.
Direct nancing or technical assistance delivery, supervision,
and administrative and other costs comes rom the Fund’s
administrative budget. Bilateral and multilateral donors have
provided generous nancial assistance as well, covering about
26 percent o the direct cost. This cooperation with external
donors both leverages the internal resources available or
technical assistance and heads o duplication o eort.
Table 4.2 IMF technical assistance resources and delivery, FY2005–07(In eective person-years)1
Fy2005 Fy2006 Fy2007
IMF amiisraiv bg 283.4 337.6 325.1
exra rsrcs 97.1 87.3 113.3
ta rsrcs 380.6 424.9 438.4
Rgia ivr 301.4 288.4 308.3
Arica 86.9 82.4 90.4
Asia a Pacic 68.2 58.5 62.7
erp 34.5 37.1 34.6
Mi eas a Cra Asia 45.1 61.0 54.2
Wsr hmispr 32.7 37.5 48.2
Ria a irria 33.9 11.9 18.2
Maagm a amiisrai2 79.2 136.5 130.1
ta ivr 380.6 424.9 438.4
ta ivr b arm 380.6 424.9 438.4
Fisca Aairs dparm 99.5 100.2 116.9
Mar a Capia Marks dparm3 127.0 125.7 117.0
Saisics dparm 53.1 54.3 56.3
IMF Isi 57.0 76.4 78.4
la dparm 23.5 20.0 26.0
or parms4 20.4 48.3 43.8
Source: IMF Oce o Technical Assistance Management.
Note: Some data have been adjusted retroactively to refect new denitions.
1 An eective person-year o technical assistance is 260 days.
2 Indirect technical assistance, including technical assistance policy, management, evaluation, and other related activities.
3 In FY2005 and FY2006, technical assistance was delivered by the Monetary and Financial Systems Department, which merged with the International Capital Markets
Department to become the Monetary and Capital Markets Department in FY2007.4 Includes the Policy Development and Review Department, the Technology and General Services Department, the Oce o Technical Assistance Management, the
Finance Department, the Human Resources Department, and all area departments.
Table 4.1 Technical assistance by countryincome group, FY2007
(Field delivery in person-years)1
ta prcCr icm gr rs-ars a
lw-icm 64.2 33.4
lwr-mi-icm 114.8 59.8
uppr-mi-icm2 8.8 4.6
hi-icm2 4.2 2.2
ta 192.1 100.0
1 An eective person-year o technical assistance is 260 days.
2 Pertains mostly to regional seminars and workshops delivered in upper-middle-and high-income countries but attended by ocials rom low- and lower-middle-income countries.
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54 The Task Force’s report is available at www.im.org/external/np/pp/eng/2005/071205.htm; the summary o the Board discussion can be ound at www.im.org/external/np/sec/pn/2005/pn05114.htm.
Table 4.3 Donors to the IMF’s technical assistance program
drs
Iivia rs1 Asraia, Bim, Caaa, dmark, Frac, Ia, Japa, lxmbr,
nras, nrwa, Spai, Sw, Swizra, ui KimMir arragms
Arica tcica Assisac Crs Arica dvpm Bak, Caaa, Cia, dmark, Fia, Frac, grma,
(eas a Ws) Ia, Japa, lxmbr, nras, nrwa, Rssia, Sw, Swizra,
ui Kim
Caribba Ria tcica Caaa, Ira, ui Kim, ui Sas, erpa ui, Ir-Amrica
Assisac Cr dvpm Bak, undP, Wr Bak
Cra Arica tcica Assisac Cr Arica dvpm Bak, Bri, Camr, Cra Arica Rpbic, Ca,
dmcraic Rpbic C, Rpbic C, eqaria gia, Frac,
gab, grma
Fiacia Scr Rrm a Caaa, nras, Swizra, ui Kim, Wr Bak
Sri Iiiaiv
Iraq tcica Assisac Asraia, Caaa, Iia, Ia, Sw, ui Kim
Mi eas tcica Assisac Cr ep, erpa ui, erpa Ivsm Bak, Frac, Japa, Jra,Kwai, lba, liba, oma, Qaar, Sai Arabia, Sa, Sria Arab Rpbic,
ui Arab emiras, Rpbic ym
Pacic Fiacia tcica Assisac Cr Asia dvpm Bak, Asraia, Japa, Kra, nw Zaa
1 Some donors contribute both individually and through multidonor pooled agreements.
Following on the Board’s endorsement in FY2006 o
proposals made by the Task Force on Technical Assistance
on how to implement the recommendations in the
Independent Evaluation Oce’s FY2005 report on Fundtechnical assistance,54 the IMF has developed a strategic
medium-term approach that closely integrates and prioritizes
country needs and technical assistance resources with the
IMF’s budget process. In addition, the IMF’s technical
assistance strategy is being increasingly viewed rom a
regional perspective, in recognition o the synergies and
benets that a regional approach can bring to technical
assistance. Regional strategies also help the IMF prioritize
and shit its resources between neighboring countries, in
response to developing needs and changing circumstances.
As called or by the Executive Board, the IMF willcontinue to make improvements to its technical assistance
program in the year ahead, including urther strengthening
the monitoring and evaluation o technical assistance to
ensure its eectiveness and eciency (CD-Table 4.3).
Other aspects o technical assistance management and
governance emphasized by the Board are also being
studied, including improving cost inormation on
technical assistance activities, reinorcing relationships
with donors to the IMF’s technical assistance program
(Table 4.3), and enlisting support rom new donors.
The IMF’s Monetary and Capital Markets Department
(MCM) provides technical assistance related to the
implementation o monetary and oreign exchange policies
and other aspects o central banking, nancial sector
oversight and regulation, the development o capital and
other nancial markets, and public sector debt and asset
management. This assistance generally involves advising
central banks and nancial supervisory agencies on
strengthening institutions and policies and improving
consistency with international standards, codes, and good
practices, and is typically delivered by sta rom IMFheadquarters and short-term experts, who in many cases are
nanced with the assistance o donors. MCM’s advice is also
delivered by long-term experts located in the IMF’s regional
technical assistance centers, and may take the orm o
regional seminars and hands-on workshops. Examples o
MCM’s technical assistance activities in FY2007 include
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supporting Nigeria’s nancial sector reorm program and
helping the Philippines’ central bank strengthen its ability to
identiy the risks associated with complex domestic conglom-
erates, based on Financial Sector Assessment Programs inboth countries; and advising Costa Rica, the Dominican
Republic, El Salvador, Guatemala, Honduras, Nicaragua, and
Panama on improving public debt management and carrying
out a diagnostic study o Central American markets or
private equity, debt, and asset-backed securities.55
The Fiscal Aairs Department (FAD) provides a range o
technical assistance and training to help countries strengthen
their scal policies and institutions, enhance implementation
capacity, and support IMF surveillance. For example, during
FY2007, FAD sta provided advice on modernizing tax and
customs administration in China, Mexico, and Turkey;continued advising the Central American countries on
improving the coordination o their tax policies and tax
administration and preparing the legislative ramework or a
regional customs union; assisted a number o post-confict
countries, including Aghanistan, Lebanon, Liberia, and
Sudan, seeking to rebuild their revenue-administration
capacity; conducted, with the support o the East AFRITAC
and private sector involvement, a seminar on improving
taxpayer services and appeals as a means o increasing taxpayer
compliance; conducted tax policy reviews in several countries,
including the IMF’s newest member, Montenegro; met a
signicant increase in demand or advice on resource taxation
rom a number o resource-rich countries in Arica, Asia, and
South America; and supplied advisory services in public
nancial management, pension reorm, scal responsibility
rameworks, and expenditure rationalization. FAD both
organizes and participates in conerences, seminars, and
workshops targeting particular countries and in conjunction
with specic institutions. For example, a major regional
outreach event or European countries on strengthening
public investment and managing risks rom public-private
partnerships was held in Budapest in March 2007.
The Statistics Department’s (STA) technical assistance
program promotes internationally accepted data standards,
with an emphasis on regional projects and collaboration
with other donors and providers. During FY2007, STA
provided technical assistance and training to a wide range
o member countries to support lasting improvements in
national statistical systems. The statistical work o the
RTACs has been ully integrated into STA’s capacity-
building program, and as a result STA elded 431 technical
assistance missions during the year, o which 157 beneted
Arican countries. The department also conducted 42
training courses in macroeconomic statistics through the
IMF Institute and the IMF Regional Training Centers, in
collaboration with various organizations.
The IMF’s Legal Department maintained an active technical
assistance program during the year directed toward helping
member countries strengthen their legal rameworks,
particularly in terms o the nancial system, taxation and
budget management, and anti–money laundering and
combating the nancing o terrorism (AML/CFT). While
demand rom member countries or advice in core legal
areas (commercial banking, central banking, and taxation)
has continued to be high, new areas o ocus have also
emerged, such as insurance, deposit insurance, nonbank
nancial institutions, and Islamic banking. The consolida-tion o AML/CFT activities in the Legal Department has
made the department the largest multilateral provider o
AML/CFT technical assistance. Support in this area has
included policy advice, drating o legislation, and guidance
55 Although capacity building still constitutes a substantial part o MCM’s technical assistance, there is a growing emphasis on assistance in more complex and specialized elds, such as infation targeting, empirically based stress-testing models, and portolio management or the public sector.
Proessor Guillermo Calvo leading a seminar at the IMF Institute
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in establishing or strengthening Financial Intelligence Units
(FIUs) and other institutions and supervisory mechanisms.
Also, training has been provided to FIU sta, nancial
supervisors, and ministries o nance and justice ocials,as well as to Financial Action Task Force–style regional
bodies to improve their capacity to conduct high-level
mutual assessments. (See Chapter 2 or more inormation
on AML/CFT.)
Training by the IMF Institute
The IMF Institute, in collaboration with other IMF
departments, trains ocials rom member countries in our
core areas: macroeconomic management, nancial sector
policies, government budgeting, and the balance
o payments, including how to strengthen the statistical,legal, and administrative ramework in these areas. Over
three-ourths o the training benets low- and lower-middle-
income countries. The Institute’s programs account or
about three-ourths o training or ocials delivered
by the IMF, including training at the regional technical
assistance centers.
In FY2007, the IMF Institute delivered 288 course-weeks,
producing close to 9,400 participant-weeks o training (CD-
Table 4.4, on the CD-ROM). Relative to FY2006, the number
o course-weeks rose by about 1 percent, while the number o
participant-weeks ell slightly, refecting normal year-to-yearvariation in the average class size.
FY2007 saw the opening o the Joint India-IMF Training
Program (ITP), the seventh in the IMF Institute network o
regional training centers (CD-Table 4.5, on the CD-ROM).
The ITP is dedicated principally to training Indian ocials
but also admits ocials rom other countries in South Asia
and East Arica.
With substantial conancing rom local cosponsors and other
donors, the development o the regional training centers has
acilitated a 50 percent increase in IMF Institute training over
the past decade. These centers now account or hal o all
training under the Institute’s program. Training at the RTCs
has other advantages: courses can be better attuned to regional
needs and oster collaboration within regions.
Training at IMF headquarters continues to play an important
role, accounting or about one-third o participant-weeks in
FY2007. The headquarters program ocuses mainly on longer
courses, which are less amenable to regional delivery because o the number o IMF sta involved, but also includes some
shorter courses that the IMF Institute is unable to deliver
widely through the RTCs. The remainder o the training took
place at overseas locations outside the regional network, largely
as part o ongoing collaboration between the IMF Institute
and regional institutions, and also through distance learning.
The tight IMF budget environment has made it more
challenging to meet the training needs o member countries
and ensure an up-to-date curriculum. The IMF Institute has
responded by increasing workloads and cutting costs, and
conancing rom training partners and other donors has beenplaying an increasingly critical role.
The IMF Institute training program is reviewed regularly to
ensure that it responds to the evolving needs o member
countries and supports new IMF initiatives.
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Chapter 5
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56 Not all o the paid-in capital is readily available to nance new lending because o the IMF’s previous commitments and its policy o lending only in the currencies o members considered nancially strong. See the box on the IMF’s nancing mechanism on the CD-ROM ( CD-Box 5.1 ).
The Fund’s Medium-Term Strategy (MTS) calls or a number o reorms in the governance and
management o the IMF, including adjusting members’ quotas to refect their role in the world
economy more accurately; strengthening communication and transparency; embedding MTS
priorities in an output-oriented medium-term budget ramework; taking other steps to make the
IMF a more cost-eective and ecient institution; and adopting a new income model to place the
IMF on a sound nancial ooting or the long term. Substantial progress was made on all o these
ronts during FY2007.
Quota and Voice Reorm
The unds or most o the IMF’s lending come out o its quota resources—the amounts countries
deposit when they join the IMF.56 Each member’s quota is based, in principle, on the relative size o
its economy and determines the amount it can borrow rom the IMF and its voting power. (As set
out in the IMF’s Articles o Agreement, each member is allotted 250 basic votes plus one vote per
SDR 100,000 o its quota.) Although quotas are reviewed periodically and can be increased when
deemed necessary by the Board o Governors (Box 5.1), the distribution o quotas and voting power
in the IMF has not kept pace with changes in countries’ relative weight in the global economy.
Moreover, the share o each member’s basic votes in total votes has been diluted by quota increases,
rom more than 10 percent until the mid-1970s to about 2 percent in recent years.
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Chapter 5 Governance, organization, and nances
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57 The Resolution can be ound on the CD-ROM, as can Press Releases 06/189, “IMF Executive Board Recommends Quota and Related Governance Reorms,” and 06/205, “IMF Board o Governors Approves Quota and Related Governance Reorms.” Press releases 06/189 and 06/205 can also be ound at
www.im.org/external/np/sec/pr/2006/pr06189.htm and www.im.org/external/np/sec/pr/2006/pr06205.htm, respectively.
58 On May 9, 2007, shortly ater the end o the nancial year, the Executive Board agreed to increase by one Advisor the stang or the Executive Directors repre- senting 20 or more countries (the two sub-Saharan Arican constituencies). A ew Directors underscored that urther steps were needed to strengthen the capacity o the Executive Directors’ Oces representing the largest constituencies.
Box 5.1 Initiation of the Thirteenth GeneralReview of Quotas
t IMF rma ccs ra rviws
mmbrs’ qas vr v ars assss
aqac is rsrc bas a ajs qas
iivia mmbrs rfc cas i ir
raiv psiis i wr cm. t exciv
Bar cmp tw gra Rviw
Qas Jaar 28, 2003, wi prpsi a
icras r a ajsms. t tir gra
Rviw Qas was iiia i Jaar 2007 a
wi b cmp b Jaar 28, 2008. t
IMF’s a qas w sa a SdR 217.3 bii.
votes in total voting power constant in the uture; and (5) measures
to increase the administrative resources o the chairs with the
largest constituencies.58
In its September 17, 2006, communiqué, the IMFC urged the
Executive Board to work constructively and expeditiously on all
elements o the reorm so as to garner the broadest possible
support, underlined the importance o timely implementation,
and called on the Managing Director to provide a status report
at its next meeting.
Following the 2006 Annual Meetings, the Executive Board
began to work on the second stage o reorm. In January 2007,
it had a preliminary discussion on a proposed amendment to
the Articles o Agreement regarding basic votes. Directors
ound the proposed amendment to be responsive to the Board
o Governors’ request and generally endorsed the ramework
proposed by IMF sta. They noted that the number by which
basic votes will be increased will need to be discussed and
agreed at a later stage, when work on the new quota ormula is
more advanced. A comprehensive work program involving
consultations with the membership and two inormal discus-
sions by the Executive Board beore the 2007 Spring Meetings
o the IMFC was initiated on a new quota ormula that would
guide the second round o quota increases.
In its communiqué o April 14, 2007, the IMFC welcomed the
broad consensus reached in the Executive Board on the legal
ramework or an amendment o the Articles o Agreement
In its communiqué o April 22, 2006, the International
Monetary and Financial Committee (IMFC) recognized the
need or undamental reorm o quotas and voice in the Fund.
It called upon the Managing Director to work with the IMFCand the Executive Board to develop concrete proposals by the
time o the IMF–World Bank Annual Meetings in September
2006 or improving the distribution o quotas and voting
power to refect changes in the weight and role o countries in
the world economy and to ensure that low-income countries
have a voice in the IMF’s decision-making process.
An intensive work program ollowed, involving IMF manage-
ment and sta, consultations with a broad spectrum o the
membership, and discussions in the Executive Board. On
August 31, 2006, the Executive Board reached agreement on
a comprehensive program o quota and voice reorms andrecommended that the Board o Governors adopt a Resolution
providing or a two-year plan to implement these reorms. This
proposal was transmitted to the Governors by the Managing
Director on September 14, 2006, and the Board o Governors
adopted the Resolution on September 18, 2006.57
In its report to the Board o Governors, the Executive Board
emphasized the two main goals o quota and voice reorms:
(1) to make signicant progress in realigning quota shares with
economic weight in the global economy and make quota and
voting shares in the Fund more responsive to changes in global
economic realities in the uture; and (2) to enhance the
participation and voice o low-income countries whose weight
in the global economy may be small but or which the IMF
plays an important advisory and nancing role.
The Resolution provided or an initial round o ad hoc quota
increases or our countries—China, Korea, Mexico, and Turkey—
that were clearly underrepresented, and a set o more undamental
reorms to be delivered by the 2007 Annual Meetings, i possible,
or by the 2008 Annual Meetings, at the latest. The reorms are to
include (1) agreement on a simple and transparent new quota
ormula; (2) a second round o ad hoc quota increases based on the
new ormula; (3) a commitment to ensuring that quota shares
continue to evolve in line with countries’ changing positions in the
world economy; (4) an increase in basic votes o at least 100 percent
to protect the voting share o low-income countries as a group,
together with adoption o a means to keep the proportion o basic
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regarding basic votes and the initial work on a new quota
ormula. It stressed the importance o agreeing on a new
ormula that is simple and transparent and that captures
members’ relative positions in the world economy whileenhancing the voice and participation o low-income countries.
The IMFC also called on the Executive Board to continue its
work on the reorm package as a matter o priority.
Communication and Transparency
Through its communication strategy and transparency policy,
the IMF seeks to increase its accountability to stakeholders and
build understanding o sound economic policies. With the
guidance and support o the Executive Board, which regularly
reviews the IMF’s communication strategy and transparency
policy, the IMF’s eorts in these areas have increased signi-
cantly since the mid-1990s.
Communication
While acknowledging that the IMF has made great strides in
increasing transparency and communication, the MTS calls or
an increase in outreach, emphasizing that bringing about policy
change requires active engagement not only with country
ocials but also with the broader public. During FY2007, IMF
sta intensied their eorts in this area and presented a new
drat communication strategy or ormal Board discussion in
early FY2008.
Outreach. The IMF continues to strengthen its outreach to its
ocial stakeholders, while also broadening outreach to other
groups, including civil society, legislators, and the private
sector. Outreach to these groups has been useul not only in
terms o explaining the IMF’s positions but also in receiving
eedback that can lead to improvements in operations, as has
already happened in several areas—or example, the streamlin-
ing o conditionality, and the IMF’s early support or the
Multilateral Debt Relie Initiative and participation in the
Extractive Industries Transparency Initiative.
As part o its outreach eorts with civil society and legislators,
in recent years the IMF launched a newsletter on its Web site
or civil society, and in FY2007 it launched a Web page or
legislators that invites the latter to send in their comments and
questions.59 In December 2006, IMF and World Bank ocials
had a two-day meeting with 55 labor union leaders rom
around the world on managing globalization and enhancing jobopportunities. Outreach events or parliamentarians included a
macroeconomic policy seminar or parliamentarians in the
Kyrgyz Republic in May 2006, and participation in two
conerences in March 2007—a two-day conerence in
Washington, D.C., or Caribbean parliamentarians and ocials
o the Inter-American Development Bank (IDB) and the IMF;
and the Annual Conerence o the Parliamentary Network on
the World Bank, which was held in Cape Town, South Arica.60
Continuing eorts were made in FY2007 to reach out to the
private sector. In February 2007, the Managing Director
delivered a speech at the Latin American Business AssociationConerence, held at Columbia University in New York, and
participated in a high-level conerence on investment in Central
America attended by senior policymakers, major international
investors, and business association leaders rom Central America
and the Dominican Republic.61 The IMF and the World Bank
helped organize the conerence, which was held in Costa Rica.
The IMF has been making greater use o seminars and coner-
ences to bring ocials and other stakeholders rom countries in
the same region together to discuss key regional economic policy
issues. For example, in December 2006 the IMF and the Arab
Monetary Fund jointly sponsored a high-level seminar in Abu
Dhabi, United Arab Emirates, on institutions and economic
growth in the Arab countries. The IMF also participated in the
Fith Annual Regional Conerence on Central America, Panama,
and the Dominican Republic, which was hosted by the Central
Bank o the Dominican Republic in Punta Cana, in June 2006. 62
The IMF and the Monetary Authority o Singapore co-hosted
their second seminar on regional nancial integration, in May
2006 (the rst seminar took place in September 2005), and the
IMF and the government o Singapore jointly organized a high-
level seminar or policymakers and economists around the world
on crisis prevention in emerging market countries in July 2006 as
a run-up to the 2006 Annual Meetings.63 The Japan Bank or
International Cooperation and the IMF cosponsored a conerence
59 The civil society newsletter is posted at www.im.org/external/np/exr/cs/eng/index.asp, and the legislators Web page is at www.im.org/external/np/legislators/index.htm.
60 For more inormation on these events, see Press Release 06/108, “IMF Macroeconomic Policy Seminar or Parliamentarians rom the Kyrgyz Republic,” at www.im.org/external/np/sec/pr/2006/pr06108.htm; a speech delivered at the Cape Town conerence by the Director o the IMF’s Arican Department, Abdoulaye Bio-Tchané, at www.im.org/external/np/speeches/2007/031707.htm; and Press Release 07/44, “Caribbean Parliamentarians Meet with the IDB, IMF, and World Bank or the rst time in Washington, D.C.” at www.im.org/external/np/sec/pr/2007/pr0744.htm.
61 The communiqué o the conerence is available at www.im.org/external/np/cm/2007/020207.htm. 62 For more inormation on the seminars on institutions and growth in Arab countries, and the th annual conerence on Central America, Panama, and the
Dominican Republic, see www.im.org/external/np/seminars/eng/2006/arabco/index.htm an d www.im.org/external/np/seminars/eng/2006/centram/index.htm, respectively.
63 See www.im.org/external/np/seminars/eng/2006/cpem/index.htm.
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in Tokyo in April 2007 on policy options and challenges or
developing Asia; speakers and participants included government
ocials and academics rom low-income countries in Asia. And
the IMF and Bruegel, a Brussels-based think tank, organized a
joint two-day conerence, “Putting Europe’s Money to Work:
Financial Integration, Financial Development, and Growth in the
European Union,” in March 2007 or researchers, policymakers,
and practitioners rom Europe and around the world.
Other examples o outreach activities can be ound in
Chapters 2 and 4.
Languages other than English. Building on the Report o a Task
Force on Publication o Fund Documents and Inormation in
Languages Other than English, which recommended transla-
tion o documents or which demand is high into languages
heavily used in the IMF’s work, a working group o IMF sta
was set up to urther consider this issue and make concrete
proposals. The ndings o the Working Group on Publication
o Fund Materials in Languages Other than English were
presented to the Executive Board in an inormal brieng in
April 2007, and the IMF has begun translating selected
documents—including press releases and WEO summaries—
more systematically into relevant languages and posting them
on its Web site. The Executive Board also approved the
translation o the 2007 Annual Report into a greater number
o languages than in the past, using savings on production
costs to achieve this goal.
Publications and the IMF’s Web site. An interdepartmental
working group reviewed the eectiveness o the IMF’s publica-
tions program during FY2007.64 While the review ound that
the undamental goals o the program remain valid—sharing
IMF research and knowledge in a cost-eective manner—it also
ound scope or improvement, notably by proposing a more
strategic approach to selecting what to publish and how best to
deliver it (in print or online or both); increasing marketing
eorts (including by entering into partnerships with commercial
publishers when appropriate); enhancing the online visibility o
the Fund’s research publications; establishing an e-commerce
site; making greater use o technologies such as print-on-
demand; and introducing a dierential pricing policy or
publications, which will give readers in developing countries
greater access to Fund publications.
64 See CD-Box 5.2 , “Disseminating inormation: The IMF’s publishing operations and Web site,” on the CD-ROM.
Rodrigo de Rato, IMF Managing Director, speaking to the media at the 2006 Annual Meetings, Singapore
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Box 5.2 Liaison with intergovernmental, international, and regional organizations
t IMF as a isry cabrai wi
mrs iraia a ria raizais.
t IMF’s cabrai wi Wr Bak is
spciay cs. Aras i wic IMF a Wr
Bak cabra ic Fiacia Scr
Assssm Prram, vpm saars a
cs, Pvry Rci Sray Papr prcss,
hIPC a Miara db Ri Iiiaivs, a
b ssaiabiiy aaysis. I Marc 2006, IMF’s
Maai dircr a Wr Bak’s Prsi
cra exra Rviw Cmmi Bak-F
Cabrai. t Cmmi sici viws rm
mmbr cris ar a pracic Bak-
F cabrai, wic as b i sic
1989 by a rma Ccra. t Cmmi ras
is rpr i Fbrary 2007.1
t IMF as cabras wi ria mia-
ra baks— Arica dvpm Bak, Asia
dvpm Bak, Ir-Amrica dvpm
Bak, a erpa Bak r Rcsrci a
dvpm—ici i-cry missi wrk a
prvisi cica assisac, a as
mis as ria miara
baks. t Ir-Amrica dvpm Bak a
Arica dvpm F paricipa i
Miara db Ri Iiiaiv.
t IMF is a mmbr Fiacia Sabiiy Frm,
wic bris r vrm fcias rsp-
sib r facia sabiiy i majr iraia
facia crs, iraia rary a
sprvisry bis, a cmmis cra bak
xprs. I as wrks wi saar-si bis
sc as Bas Cmmi Baki Sprvisi
a Iraia Assciai Israc
Sprvisrs. I 2000, hrs Kör, IMF
Maai dircr, sabis Capia Marks
Csaiv grp prvi a rm r irma
ia bw paricipas i iraia capia
marks a IMF; grp is cair by
IMF’s Maai dircr.
t IMF, r is Spcia Rprsaiv
ui nais, cmmicas a cpras wi
ui nais a a mbr un acis.
ovr pas yar, paricar mpasis as b
pac sppri wrk ui nais’
w Pacbii Cmmissi wi IMF
cis b a i Fiaci r
dvpm prcss a paricipa i
aciviis un ecmic a Scia Cci
(eCoSoC). Cabrai bw IMF a
Wto aks pac rmay as w as irmay, as
i i ir Cprai Arm 1996.
t IMF as bsrvr sas a Wto mis, a
IMF sa crib Wto Wrki grp
tra, db, a Fiac, a Cmmi
Baac Payms Rsricis. IMF sa paricipa
i Ira Framwrk r tra-Ra
tcica Assisac a Ai r tra task Frc
(s Bx 3.3).
IMF sa as iais wi oraizai r
ecmic Cprai a dvpm (oeCd),
Bak r Iraia Sms (BIS),
erpa Cmmissi, Asia-Pacifc ecmic
Cprai (APeC), a svra ria rps i
Asia, ici Assciai Sas Asia
nais (ASeAn). t ASeAn Scraria, IMF,
a Rya gvrm Cambia c-s a
i-v smiar i J 2006 w riairai c accra vpm
Cambia, la Pp’s dmcraic Rpbic,
a Viam.2
t IMF is a aciv paricipa i mis a
aciviis majr irvrma rps,
ici grp Sv (g-7), grp ei
(g-8), grp t (g-10), grp twy (g-20),
a grp twy-Fr (g-24). t g-10 cris
paricipa i IMF’s gra Arrams
Brrw, a arram sabis i 1962 a ca
b ivk i IMF’s rsrcs ar sima b
isfci m mmbrs’ s.
1 See Press Release 07/32, “IMF Managing Director and World Bank President Paul Wolowitz Welcome Report on Enhancing IMF–World Bank Cooperation,” and the Report itsel. Both are on the CD-ROM and al so on the IMF’s Web site, at www.im.r/xra/p/sc/pr/2007/pr0732.m.
2 See Press Release 06/145, at www.im.r/xra/p/sc/pr/2006/pr06145.m.
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The IMF’s Web site is the public’s primary source o inorma-
tion about the IMF. During FY2007, the site was redesigned to
make it a more eective communication tool, the IMF Survey
increasingly became a Web-based product, and there was a shit
to greater reliance on the Web or dissemination o inormation
and messages to enable aster, more requent, and more fexible
communication between the IMF and its stakeholders.
Engagement with media. A biweekly media brieng by the
External Relations Department, instituted in late 1999 and initially
intended or media based in Washington, D.C., has since
developed into a webcast or journalists around the world. The
Online Media Brieng Center, a password-protected multimedia
site set up in FY2004, allows journalists to access documents under
embargo, participate in press briengs, and receive inormation
and data tailored to their needs. The IMF’s operational sta have
also increased their contacts with the media.
Transparency policy
The IMF’s transparency policy stems rom an Executive Board
decision in January 2001 establishing the presumption that
country documents and policy papers and associated Public
Inormation Notices (PINs) would systematically be published,
although publication remains voluntary. The decision ollowed
steps that had been taken since 1994 to enhance the transparency
o the IMF and to increase the availability o inormation about
its members’ policies, while including saeguards to maintain
the rankness o the IMF’s policy discussions with members by
Box 5.3 Activities of the IEO in FY2007
t Ip evaai oc (Ieo) was
sabis i 2001 cc ip a
bjciv vaais IMF picis a aciviis
wi a viw icrasi IMF’s rasparc a
accabii a sri is ari cr.
ur is trms Rrc, Ieo is
ip IMF maam a pras a
arm’s rm IMF’s exciv Bar, wic
i rprs is is. I Jaar 2007, Bar
ar a mr ssmaic apprac , a
srr miri , impmai Bar-
rs Ieo rcmmais.
dri Fy2007, Ieo cs is rs
cmpi w vaais: “t IMF a Ai Sb-Saara Arica,” a “t IMF’s Avic
exca Ra Pic.” t exciv Bar
iscss rmr i Marc 2007 (s Capr
3). Fwi Bar iscssi, Ieo
prs rpr’s is a svra ira-
ia rac vs, sari wi a smiar a
Arica dvpm Bak i a Marc. t
rpr as b rasa i Frc a
Prs. t vaai IMF’s avic
xca ra pic was s exciv
Bar i Marc 2007 a was sc r
iscssi i ar Fy2008. t vaai xprs
wr r IMF i xca ra pic
avic is car a rs, asssss
qai a avic, a xamis qai
ia wi cr ariis. Wi
ackwi a qai IMF’s avic
is mmbr cris as imprv, Ieo
iis a rvaia ama
prps IMF xca ra srviac, rb
carii xpc rs IMF a
mmbr cris, a rs ai rcmm-
ais r imprvi maam a
cc IMF’s xca ra pic avic
a iracis wi mmbr cris (s
Capr 2).Wrk a ir vaai, “Srcra Ciiai
i IMF-Sppr Prrams,” ci ri
Fy2007. t rpr is xpc b aiz a
s exciv Bar br Aa
Mis i ocbr 2007.
Fr pics wr a Ieo’s wrk prram r
vaai vr x w ars: (1) aspcs IMF
crpra vrac—ici r
Bar; (2) IMF’s iracis wi is mmbr
cris; (3) IMF’s rsarc aa; a (4)
IMF’s apprac iraia ra isss.
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IMF Aa Rpr | 2007
striking the right balance between transparency and condenti-
ality. Members may request deletion o inormation not yet in
the public domain that constitutes either highly market-
sensitive material or premature disclosure o policy intentions.
Following their discussion in FY2006 o an IMF sta review o
the transparency policy, Executive Directors called on the sta to
produce annual updates on the policy’s implementation or
posting on the IMF’s Web site. The second annual report on the
implementation o the transparency policy, published in February
2007, presents inormation on documents considered by the
Board between November 1, 2005, and October 31, 2006, and
published by December 31, 2006, including publication rates or
each type o document, lags between Executive Board discussions
o documents and publication, deletion o material rom
documents, and the publication behavior o member countries.65
In FY2007, publication o reports on Article IV consultations and
use o Fund resources rose or the third year in a row, increasing
rom 82 percent o total reports in 2005 to 85 percent in 2006.
The number o member countries that published all reports on
their Article IV consultations and use o IMF resources increased
rom 136 in 2005 to 142 in 2006. The share o Financial SystemStability Assessments (reports produced under the Financial Sector
Assessment Program) released climbed to 82 percent, and the
publication rates both o documents announcing the policy
intentions o countries entering into arrangements with the IMF
and o PINs increased to 94 percent.66
65 The report, “Key Trends in Implementation o the Fund’s Transparency Policy,” can be ound at www.im.org/external/pp/longres.aspx?id=4040. 66 The increased transparency o the IMF is widely recognized. In its 2006 Global Accountability Report, One World Trust ranked the IMF third out o 10
intergovernmental organizations and ourth out o 30 intergovernmental and private transnational companies in terms o transparency. The report can be read at www.oneworldtrust.org/?display=index_2006.
67 The Executive Board’s calendar or FY2007 and a description o its main activities can be ound on the CD-ROM. General inormation on the governance o the IMF can also be ound on the CD-ROM, in the IMF Handbook. The list o Executive Directors and their Alternates on April 30, 2007, is on pages 68–69. The voting power o each member is shown in Appendix IV, on the CD-ROM.
Management and Organization
During FY2007, the IMF reassessed its risk-management rame-
work, curbed its administrative expenditures, and streamlined
its procedures by consolidating or shortening reports, modiy-
ing misreporting procedures, and lengthening the intervals
between policy reviews. It also sought to enhance its eective-
ness through improved collaboration in a range o areas with
other international and regional bodies (Box 5.2) and by taking
account o the recommendations made by the Independent
Evaluation Oce (IEO) on Fund policies (Box 5.3).
How the IMF is run
The highest decision-making body o the IMF is the Board o
Governors, which is appointed by the IMF’s member countries.
As set out in the Fund’s Articles o Agreement, the Executive
Board is responsible or conducting the business o the Fund,
and or this purpose exercises all the powers delegated to it by
the Board o Governors. The Executive Board is composed o
24 Executive Directors and their Alternates appointed or
elected by member countries and has responsibility or the day-
to-day oversight o the IMF’s work at Fund headquarters,
located in Washington, D.C.67 The Managing Director o theIMF serves as the Chair o the Executive Board.
The Board o Governors consists o one Governor and one
Alternate Governor rom each o the IMF’s 185 member
countries. The governor is usually the member country’s minister
Meeting o the IMFC at the 2006 Annual Meetings, Singapore
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68 On July, 12, 2007, the Executive Board adopted a decision setting out procedures or the nomination and selection o the Managing Director; see www.im.org/external/np/sec/pr/2007/pr07159.htm.
o nance or the head o its central bank. All governors meet
once a year at the IMF–World Bank Annual Meetings. There are
two committees o Governors that represent the whole member-
ship. The International Monetary and Financial Committee(IMFC) is an advisory body o 24 IMF Governors (or their
Alternates) representing the same countries or constituencies
(groups o countries) as the 24 Executive Directors.
The IMFC advises, and reports to, the Board o Governors on
matters relating to the latter’s unctions in supervising the
management and adaptation o the international monetary
and nancial system, and in this connection reviewing
developments in global liquidity and the transer o resources
to developing countries; considering proposals by the
Executive Board to amend the Articles o Agreement; and
dealing with disturbances that might threaten the system. It
has no decision-making powers. The IMFC normally meets
twice a year, in March or April and in September or October,
at the time o the Spring and Annual Meetings.
The Development Committee (ormally, the joint Ministerial
Committee o the Boards o Governors o the Bank and the
Fund on the Transer o Real Resources to Developing
Countries) is a joint World Bank–IMF body composed o 24
World Bank or IMF Governors or their Alternates; it advises
the Boards o Governors o the IMF and World Bank on
critical development issues and on the nancial resources
required to promote economic development in developing
countries. Like the IMFC, it also normally meets twice a year.
Under the Articles o Agreement, the IMF’s Executive Board
is responsible or the selection o the Managing Director o
the Fund. Any Executive Director may submit a nomination,
regardless o nationality, or the position.68 The Managing
Director is appointed or a ve-year, renewable term. He/she, in
turn, with the concurrence o the Executive Board, appoints a
First Deputy Managing Director and two Deputy Managing
Directors to provide managerial support, one o whom chairs
the Board in the Managing Director’s absence. The Managing Director is chie o the operating sta o the IMF and conducts
the ordinary business o the IMF under the direction o the
Executive Board. He/she is ultimately responsible or all aspects
o the internal management and working o the institution and
its relations and communications with the outside world. The
three Deputy Managing Directors share oversight o the IMF’s
relationship with individual member countries, chair selected
Executive Board meetings, and oversee sta work in specic areas.
The IMF’s sta is appointed by the Managing Director, and its
sole responsibility is to the IMF. At April 30, 2007, the IMF had
2,005 proessional and managerial sta and 673 sta at other
levels. Eighty-two members o the proessional and managerial
sta were resident representatives stationed in Arica, Asia and
the Pacic, Europe, the Middle East, and Latin America and the
Caribbean, covering a total o 92 member countries. Resident
representatives, through their proessional expertise and amiliarity
with local conditions, contribute to the ormulation o IMF policy
advice, monitor countries’ economic perormance, and coordinate
technical assistance; those in low-income countries take part in
discussions on poverty reduction strategies. Resident representa-tives also alert the IMF and the host country to potential policy
slippages, provide on-site program support, and play an active role
in IMF outreach, working with dierent branches o government,
civil society organizations, donors, and other stakeholders.
The ramework or human resource management in the Fund
refects evolving best practices that are consistent with the
mission o the institution and the objective o maintaining
the quality and diversity o its sta. The Articles o Agreement
state that the eciency and technical competence o Fund sta
are expected to be o the “highest standards,” and that, in
appointing the sta, the Managing Director “shall . . . pay dueregard to the importance o recruiting personnel on as wide a
geographical basis as possible.” In addition, all sta members
observe the highest standards o ethical conduct, consistent with
the values o integrity, impartiality, and discretion, as set out in
the IMF Code o Conduct and its Rules and Regulations.
Recognizing that the membership must have at its service
individuals who understand, through their proessional
experience and training, a wide range o policymaking challenges
that conront country ocials and who can oer policy advice
appropriate to the circumstances o each o the 185 member
countries, the Executive Board has long emphasized andexpressed concern about diversity, and has repeatedly called or
improvements in the diversity o the sta. The Fund thus makes
every eort to ensure that sta diversity refects the institution’s
membership, actively seeking candidates rom all over the world.
It recently established a Diversity Council to urther its diversity
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agenda, building on the creation in 1995 o the position o
Diversity Advisor. Progress is monitored and problems are
reported in a transparent manner in various ormats—including
the Diversity Annual Report— on the IMF Web site. O the IMF’s
185 member countries, 142 were represented on the sta at the
end o 2006. Tables showing the distribution o the IMF’s sta
by nationality, gender, and developing and industrial countries
are on the CD-ROM (CD-Tables 5.1, 5.2, and 5.3), as is a table
showing the sta salary structure (CD-Table 5.4).
The list o the IMF’s senior ocers and the IMF organization
chart are on pages 70 and 71, respectively, o this Report .
The organization o the IMF and the unctions o its dierent
departments are described in the IMF Handbook , which can
be ound on the CD-ROM.
Table 5.1 Administrative budgets, FY2005–081
(In millions o U.S. dollars)
Fy2005 Fy2006 Fy2007Aca Aca Fy2007 Aca Fy2008
xirs xirs Bg xirs Bg
Amiisraiv xirs
Prs
Saaris 375.2 392.6 407.5 404.1 424.6
Bs a r prs 259.5 273.9 292.7 303.4 298.5
Sba 634.7 666.5 700.2 707.5 723.1
or
trav 90.2 94.2 102.02 93.2 100.5
Biis a r 167.3 169.6 177.9 159.7 170.2
Sba 257.5 263.8 279.9 258.3 270.7
Grss xirs 892.2 930.3 980.2 965.8 993.8
Rcips (66.1) (56.0) (68.3) (68.5) (71.4)
n amiisraiv xirs 826.1 874.4 911.9 897.2 922.3
Note: Figures may not add because o rounding.
1 Administrative budgets as approved by the Board or the nancial years ending April 30, 2007, and April 30, 2008, compared with actual expenditures or the nancial years ended April 30, 2005, April 30, 2006, and April 30, 2007.
2 Includes $5.0 million as a contribution to the costs o holding the Annual Meetings in Singapore.
Box 5.4 Performance indicators
t IMF pas irc svra ps prr-
mac iicars (PIs) prrssiv, ici
wi:
n Qai iicars r a a ps, a
qai a qai iicars r sppr a
vrac aciviis, a wi qai
iicars r sc a a irmia
ps, wi b irc bii i Fy2008.
n timiss iicars a r PIs si
capr IMF’s rspsivss wi b pas
i vr a r pri.
n Frr aaica wrk wi b rak
xami asibii irci sc
cm iicars—i paricar, irmia-
cm iicars (rar as praia
mr rva a a-cm iicars)—
a r imprv cs-miri
ciqs, aciia s cs
iicars i b a bsiss-pai prcsss.
Wrk is as r wa irc sppriv
irmai c appicais a
sabis a cis rviw prcss r PIs
p sr ir ci rvac IMF’s
sra a bsiss m.
Figure 5.1 Estimated gross administrative expendi-tures by key output areas, FY2007
Cr-spcic aria miri
37.5%
gba miri14.0%
Cr prramsa acia sppr
24.3%
Capaci bii24.3%
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Administrative and capital budgets
The administrative budget provides or the personnel and travel
costs and other recurrent administrative expenditures incurred by
the IMF in providing services to member countries and theinternational community. The annual budget covers the period
May 1 through April 30, the IMF’s nancial year, and is
approved by the Executive Board on a net basis (dened as gross
expenditures less receipts).69 The Executive Board also approves a
limit on gross expenditures, based on an upper range o the
estimate or receipts. The IMF’s net administrative expenditures
are unded rom operational income, which includes charges on
the use o IMF resources, and rom reserves.
The IMF’s capital budget provides unds or capital projects
starting in the orthcoming nancial year; the projects approved
orm part o the three-year capital plan that covers all new
capital projects. Capital appropriations can be accessed or three
years; unds unused at the end o the three-year period lapse.
Budgets and actual expenditures in FY2007
The IMF’s administrative budget or the nancial year that
ended April 30, 2007, authorized total net expenditures o
$911.9 million, a limit on gross expenditures o $987.1 million,
and appropriations o $48.1 million or capital projects
beginning in FY2007. The Executive Board also took note o
indicative net administrative budgets o $929.6 million and
$952.8 million or FY2008 and FY2009, respectively, and thethree-year capital plan o $141 million.
The development o the MTS, the review o the IMF’s
employment, compensation, and benets ramework, and
the IMF’s deteriorating income position have changed the
institutional and nancial environment in which the IMF
operates. Accordingly, the FY2007–09 budgets approved by
the Executive Board refected a planned reduction in the
overall size o the IMF’s real administrative resource envelope
and marked the beginning o a downward trend in planned
capital expenditures. FY2007 net expenditures were to be held
constant in real terms, while the planned FY2008 andFY2009 administrative budgets required real reductions.
Notwithstanding the proposed declining real resource
envelope, the FY2007–09 medium-term budget (MTB)
provided the resources necessary or the IMF to deliver its key
outputs—including new MTS initiatives—accommodated by
increases in the IMF’s internal administrative eciency and
reductions in support-related costs.
The outturn on the net administrative budget or FY2007 was
$897.2 million, $14.7 million (1.6 percent) less than budgeted.
Receipts were $0.2 million above the central estimate on which
the net administrative budget was based. Gross administrative
expenditures were $14.4 million (1.5 percent) below the
$980.2 million central estimate.
Actual administrative expenditures were a little below budget
because o slightly lower-than-planned use o resources in the
delivery o IMF outputs and a shortall on certain planned
outputs: a small number o projects were delayed, so that the
associated expenditures will now be incurred in the current
nancial year. The resources allocated to the delivery o theIMF’s outputs in FY2007 refected the new priorities identied
under the medium-term strategy (Figure 5.1). The new
multilateral consultation and the extension o the work o the
Consultative Group on Exchange Rate Issues (CGER) to a
larger number o countries led to an increased share o gross
administrative resources being devoted to multilateral surveil-
lance in FY2007 relative to past years.70 Relative to FY2006,
additional resources were devoted to regional and nancial
sector surveillance (both MTS priorities), while a smaller share
o resources was devoted to work on country programs and
nancial assistance. The share o resources devoted to capacity
building (technical assistance and training) was about the same
as in previous years.
In terms o inputs, the gap between budget and outturn
refected a number o actors (Table 5.1). Underlying travel
expenditures were about 4 percent ($3.8 million) under budget,
and buildings and other expenditures were almost 9 percent
($15.2 million) under budget, the latter refecting lower
69 Just over hal o the receipts consist o external donor contributions or technical assistance to, and training o ocials rom, member countries; the remainder includes proceeds rom publications.
70 Both the multilateral consultation and the CGER’s work are discussed in Chapter 2.
Figure 5.2 Estimated gross administrative expendi-tures by key output areas, FY2008
Cr-spcic aria miri
35.3%
gba miri17.3%
Cr prramsa acia sppr
23.1%
Capaci bii24.2%
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64
IMF Aa Rpr | 2007
building-occupancy costs and less use o contractual services
than expected. Personnel-related expenses were about 1 percent
($7.3 million) over budget.71
Total capital spending in FY2007 was within the budget or
projects approved during FY2005–06. O the $45.6 million in
total capital expenditures, $16.1 million was or building
acilities, $5.3 million or the IMF’s Headquarters 2, and
$24.1 million or inormation technology projects.
Medium-term budget, FY2008–10
The FY2008–10 medium-term budget approved by the
Executive Board on April 25, 2007, allows or an underlying
1.7 percent increase each year, thus implying a real reduction in
the Fund’s administrative resources or the next three years.
Executive Directors agreed that, although a new income model—building on the recommendations o the Committee o Eminent
Persons (see “Financial Operations and Policies” below)—must
play the major role in putting the IMF’s nances on a sustainable
ooting, expenditure restraint is also necessary. To ensure
continued delivery o the IMF’s outputs in line with the MTS, the
additional resources allocated to meet new needs and priorities o
member countries are to be more than oset by savings generated
through the increased eciency o existing operations and by
scaling back or eliminating lower-priority activities.
For FY2008, the Executive Board approved a net administrative
budget o $922.3 million, with an upper limit on gross expendi-tures o $998.2 million, and took note o the indicative net
administrative budgets o $938.0 million and $959.4 million or
FY2009 and FY2010, respectively.72 The Board also approved
appropriations o $46.6 million or capital projects and took note
o the medium-term capital plan, totaling $138.0 million.
Continuing the budget reorms that began six years ago, in
FY2008 the IMF will begin implementing a ull medium-term
administrative budget supported by three-year business plans
or its departments and oces. In addition, as discussed in
Box 5.4, the IMF is introducing perormance indicators to
assist in monitoring the delivery o departments’ business plans.It is also taking measures to improve the accuracy o the systems
or allocating costs to specic outputs.
Departmental plans indicate that the reallocation o resources
in line with MTS objectives is set to continue under the
FY2008–10 medium-term budget. Figure 5.2 shows each
output’s share o total resources or FY2008.
Box 5.5 Safeguard assessments
t IMF’s saars assssms pic miias
risk a as ma mmbr cris wi b
miss. Saar assssms aim prvi
rasab assrac IMF a a cra bak’s
ramwrk acia rpri, ai, a crs
is aqa maa is rsrcs, ici IMF
as (s Cd-Bx 5.3 Cd-RoM). I Fy2007,
F cc assssms 12 cra baks
i mmbr cris, brii a mbr
cmp assssms as Apri 30, 2007, 136.
oi miri saars ramwrks a
cra baks cis r as as mmbrs av
cri sai wi IMF (53 cra baks a
-Apri 2007). Cra baks av rambrac is saars assssms,
a saars assssms pic as ac
IMF’s rpai a cribii as a pr
r wi pi imprv prais a
cr ssms cra baks.
71 Thi s overrun in personnel-related expenses was more than accounted or by a special one-o transaction o $19 million, approved by the Executive Board, to accel- erate payments into the Sta Retirement Plan (SRP) under a program to provide retirement benets to sta who were ormerly employed on a contractual basis.
72 The nominal gures or both FY2008 and FY2009 are below the indicative gures provided last year, principally because o a reduction in infation.
In terms o inputs, the FY2008 administrative budget allows
or a 3.3 percent structural salary adjustment (the salary
structure as o May 1, 2007, can be ound in CD-Table 5.4
on the CD-ROM). Changes to travel policies and practices are
expected to hold down travel costs. Expenditures on buildings
and other items are budgeted to decline, refecting targeted
reductions in support costs.
Modernizing the risk-management ramework
During FY2007, the Advisory Committee on Risk Management
(ACRM), established in October 2006 and chaired by Fund
management, prepared the IMF’s rst annual report on risk
management based on a Fund-wide survey on operational risks.
The report, accompanied by reports on the strategic, core-
mission, and nancial risks aced by the IMF, was reviewed by
the Executive Board and discussed in March and April 2007.Executive Directors considered the report and the underlying
work to be an important step in the IMF’s eorts to integrate
and strengthen various aspects o risk management. They
stressed the oversight and critical duciary responsibility o the
Executive Board or risk management, noting that the day-to-
day operational aspects o the IMF’s risk-management processes
are the purview o Fund management.
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The reports presented to the Board constituted a comprehen-
sive assessment o the main risks acing the IMF and the
measures in place to mitigate them. The ndings were that
(1) strategic risks were generally well covered with the Medium-Term Strategy in place; (2) core-mission risks were well covered
by the Fund’s nancial policies and strong oversight and review
unctions (Box 5.5); (3) nancial risks—in particular income
risk—are being addressed by shareholders; and (4) measures in
place to address the key remaining operational risks (dened as
those with a high probability o occurrence or a potentially
signicant impact) are generally adequate.
Notwithstanding the progress achieved thus ar, developing a
risk-management ramework or the IMF remains a work in
progress, to allow the Fund to learn rom experience and adapt
in a timely way to changing circumstances and any new risks
uture changes may engender. Such a dynamic approach should
help the ramework evolve in line with emerging international
best practices while continuing to give due consideration to the
special character o the IMF as a cooperative global institution
and provider o public goods.
Streamlining
In a cost-conscious environment, the MTS proposes streamlining
IMF operations and reviewing the allocation o resources to
reocus them on more strategic issues while strengthening the
quality and eectiveness o surveillance. In FY2007, the
Executive Board lengthened the cycle or most IMF policy
reviews, consolidated some reports, and eliminated others. To
enhance the timeliness o surveillance, the Board shortened the
interval between the conclusion o Article IV missions and Board
discussions. The IMF experimented with streamlined Article IV
consultations (see Chapter 2), and procedures in cases o minor
misreporting o data by member countries were modied to
make them less onerous or both the IMF and the member.73 The
IMF also reviewed certain support services to identiy opportuni-
ties or delivering outputs more eciently and at a lower cost.
Financial Operations and Policies
Income, charges, remuneration, and burden sharing
The IMF, like other nancial institutions, earns income rom
interest charges and ees levied on its loans and uses the income
to meet unding costs, pay or administrative expenses, and build
up precautionary balances. The current ramework relies heavily
on income rom lending. A priority or the IMF in the period
ahead is to establish a new model that generates steady, diversi-
ed, and reliable long-term sources o income better adapted
than the current model to the broad range o the IMF’s activities.
Under the current income model, the basic rate o charge (the
interest rate) on regular lending is determined at the beginning
o the nancial year as a margin in basis points above the SDR
interest rate (see Box 3.1). These charges are intended to cover
the cost o unds and administrative expenses and to achieve an
agreed net income target or the year. For FY2007, however, the
Board agreed to (1) keep the margin or the rate o charge
unchanged rom FY2006, at 108 basis points above the SDR
interest rate, and (2) temporarily suspend reserve accumulation.
Since November 2000, the IMF has imposed surcharges on
credit extended to discourage unduly large use o credit in thecredit tranches and under Extended Arrangements and to
preserve the revolving nature o IMF nancial resources. The
IMF also imposes surcharges on shorter-term loans under the
Supplemental Reserve Facility (SRF) that vary according to the
length o time credit is outstanding. Income derived rom
surcharges can be placed in the IMF’s reserves or used or other
purposes as decided by the Executive Board.
Table 5.2 Arrears to the IMF of countries with obligations overdue by six months or more, by type
(In millions o SDRs; as o April 30, 2007)
B
Gradarm SdR
ta (ic. SAF1) darm trs F pRGF-eSF
libria 530.8 472.1 28.1 30.6 0.0Smaia 233.4 213.0 12.4 8.0 0.0Sa 1,033.2 953.4 0.0 79.8 0.0Zimbabw 84.7 0.0 0.0 0.0 84.7
ta 1,882.1 1,638.5 40.5 118.4 84.7
Source: IMF Finance Department.
1 Structural Adjustment Facility.
73 See PIN 06/95, “IMF Executive Board Modies Procedures in De Minimis Cases o Misreporting,” on the CD-ROM or at www.im.org/external/np/sec/pn/2006/pn0695.htm.
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66
IMF Aa Rpr | 2007
The IMF also receives income rom borrowers in the orm o
service charges, commitment ees, and special charges. A one-time
service charge o 0.5 percent is levied on each loan disbursement
rom the General Resources Account. A reundable commitment
ee on Stand-By and Extended Arrangements, payable at the
beginning o each 12-month period under the arrangement, is
charged on the amounts that may be drawn during that period,
including amounts available under the SRF. The ee is 0.25 percent
on amounts committed up to 100 percent o quota and
0.10 percent thereater. The commitment ee is reunded when
credit is used in proportion to the drawings made. The IMF also
levies special charges on overdue principal payments and on
charges that are overdue by less than six months.
The IMF pays interest (remuneration) to member country
creditors on their reserves held by the IMF (known as reserve
tranche positions) based on the SDR interest rate. The basic rate
o remuneration is currently set at 100 percent o the SDR interest
rate (the upper limit permitted under the Articles o Agreement),
but it may be set as low as 80 percent o that rate (the lower limit).
Since 1986, the rates o charge and remuneration have been
adjusted under a burden-sharing mechanism that distributes the
cost o overdue nancial obligations between creditor and debtor
members. Loss o income rom unpaid interest charges overdue or
six months or more is recovered by increasing the rate o charge
and reducing the rate o remuneration. The amounts thus collected
are reunded when the overdue charges are settled. Additional
adjustments to the basic rates o charge and remuneration are made
to generate resources or a Special Contingent Account (SCA-1),
which was established specically to protect the IMF against the
risk o loss resulting rom arrears. Eective November 1, 2006, the
Board decided to suspend contributions to the SCA-1. In FY2007,
the adjustments or unpaid interest charges and the allocation to
the SCA-1 resulted in an increase to the basic rate o charge and a
reduction in the rate o remuneration o 23 basis points. The
adjusted rates o charge and remuneration averaged 5.28 percent
and 3.74 percent, respectively, or the nancial year.
Income in FY2007 ell SDR 111 million short o expenditures.
The net income shortall largely refects a substantial decline
in IMF credit outstanding, rom a peak o SDR 70 billion in
September 2003 to SDR 7.3 billion at the end o FY2007, owing
to low demand or new IMF credit and advance repayments by
some members in recent years. The income shortall will be oset
against the Fund’s reserves (retained earnings), which amounted
to some SDR 6 billion at end-FY2007. The IMF has taken a
number o steps to strengthen its income position. The Board’s
Box 5.6 Investment Account
t IMF’s Arics Arm prvi r sabism a Ivsm Acc (IA)
ra icm p IMF m is prai
css. As par rviw IMF’s facs a
facia srcr a ba i 2004, IMF’s
exciv Bar sppr bra
IMF’s icm bas iv ci i ma r IMF
i, i mai src icm.
t IA was sabis by a exciv Bar cisi i
Apri 2006 a i J 2006 r a rasr
crrcis qa SdR 5.9 bii rm gra
Rsrcs Acc (gRA). t Arics imi am
a may b rasrr IA qiva
F’s ra a spcia rsrvs a im
cisi mak rasr. t J 2006 rasr
was qiva F’s a rsrvs a a im.
Br i IA, rsrvs rm par
crrcy baacs kp wi crir mmbrs. t
rasr crrcis IA rr icras
rsrv rac psiis crir mmbrs. Rsrv
rac psiis ar rmra a 3-m SdRirs ra, impici rr F’s rsrvs
prir IA.
t IMF’s bjciv is r rr IA
xc rr SdR irs ra vr im
wi miimizi rqcy a x
aiv rrs a rprrmac vr a 12-
m riz. t aciv is bjciv, rai
IA pri is maiai by 3-m
isrms r ivsms i iib r-
rm vrm bs a r fx-icm
scriis. exra ass maars—ici
Wr Bak, Bak r Iraia Sms,
a priva maars—ar rs wi byi a
si iivia scriis i accrac wi IA’s
ivsm ariy, iis, a bcmark.
A - r-yar bcmark ix was ap r
IA. hisrica prrmac sss a rsi
xsi ivsm mariis by r-
m SdR ra wi ra aiia icm vr im.
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establishment o the Investment Account in April 2006 and its
unding with SDR 5.9 billion in June 2006 were the rst steps
in diversiying the IMF’s sources o income (Box 5.6).
The IMFC recognized the need or more predictable and stable
sources o IMF income and called on the Managing Director to
develop proposals expeditiously. In May 2006, the Managing
Director established the Committee o Eminent Persons to Study
Sustainable Long-Term Financing o the IMF.74 The Committee
presented its recommendations to management and the
Executive Board in early 2007. At its April 2007 meeting, the
IMFC endorsed the report as a sound basis or urther work on
the development o a new income model or the IMF and looked
orward to proposals rom the Managing Director or consider-
ation by the Executive Board. Work on the development o the
new model is a priority or FY08.
Arrears to the IMF
Overdue nancial obligations to the IMF totaled SDR 1.88 bil-
lion at end-April 2007 (Table 5.2), 83 percent o which was
accounted or by Sudan and Liberia; Somalia and Zimbabwe
accounted or the balance. At end-April 2007, all arrears to the
IMF were protracted (outstanding or more than six months);
39 percent represented overdue principal, and the rest, overdue
charges and interest. More than our-ths represented arrears to
the GRA, while the remainder represented arrears to the SDR
Department Trust Fund and the PRGF-ESF Trust. Zimbabwe is
the only country with protracted arrears to the PRGF-ESF Trust.
Under the IMF’s strengthened cooperative strategy on arrears,
remedial measures have been applied against countries with
protracted arrears. As o the end o the nancial year, Liberia,
Somalia, Sudan, and Zimbabwe remained ineligible to use GRA
resources. Zimbabwe continued to be excluded rom the list o
PRGF-eligible countries and is subject to a declaration o
noncooperation. In view o Liberia’s strengthened cooperation
with the Fund, on October 2, 2006, the Executive Board decided
to initiate the de-escalation o the remedial measures that had been
applied against Liberia and lited the declaration o noncooperation.
IMF audit mechanisms
The IMF’s audit mechanisms consist o an external audit rm,
an internal audit unction, and an independent External Audit
Committee (EAC) that oversees the work o both. The EAC,
which also oversees the IMF’s accounting, nancial reporting,
internal control, and risk-management unctions, is composed
o three members selected by the Executive Board and appointed
by the Managing Director. The members serve or three-year
terms on a staggered basis and are independent o the IMF. EAC
members are nationals o dierent IMF member countries at the
time o their appointment and must possess the expertise andqualications required to carry out the oversight o the annual
audit. Typically, candidates or the EAC come rom international
public accounting rms, the public sector, or academia.
The EAC selects one o its members as chair, determines its own
procedures, and is independent o the IMF’s management in
overseeing the annual audit. However, any changes to the EAC’s
terms o reerence are subject to Board approval. The EAC typically
meets in person in early January, in late June ater the completion
o the audit, and in July to report to the Board. IMF sta and the
external auditors consult with EAC members throughout the year.
The 2007 EAC members are Dr. Len Konar (Chair), Board
Member, South Arican Reserve Bank; Mr. Satoshi Itoh, ormer
Proessor, Chuo University, Japan; and Mr. Steve Anderson, Head
o Risk Assessment and Assurance, Reserve Bank o New Zealand.
The external audit rm, which is elected by the Executive Board
in consultation with the EAC and appointed by the Managing
Director, is responsible or perorming the external audit and
expressing an opinion on the IMF’s nancial statements based on
the audit. At the conclusion o the annual audit, the EAC
transmits the report issued by the external audit rm, through
the Managing Director and the Executive Board, to the Board o
Governors and bries the Executive Board on the results o the
audit. The external audit rm is normally appointed or ve
years. Deloitte and Touche LLP is the IMF’s external auditor.
The internal audit unction is perormed by the Oce o
Internal Audit and Inspection (OIA), which provides indepen-
dent examinations o the eectiveness o controls, governance
processes, and risk management. To meet this objective, OIA
conducts about 25 audits and reviews a year. OIA reports to IMF
management and to the EAC, thus assuring its independence. In
addition, the Executive Board is brieed regularly on OIA’s work
program and the major ndings o its audits and reviews.
The IMF’s nancial statements or FY2007 orm Appendix VI o
this Annual Report and can be ound on the CD-ROM as well as on
the Fund’s Web site, at www.imf.org/external/pubs/ft/quart/index.htm.
Readers who wish to receive a print copy o the nancial
statements or FY2007 may request one rom IMF Publication
Services, 700 19th Street, N.W., Washington, DC 20431.
74 The Committee’s nal report was released in January 2007 and is available on the CD-ROM and on the IMF’s Web site, at www.im.org/external/np/oth/2007/013107.pd. The IMF’s press release announcing the release o the report can also be ound on the CD-ROM, as well as at www.im.org/external/np/sec/pr/2007/pr0718.htm.
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IMF Aa Rpr | 2007
Ai
M lsar ui SasVacant
Si Kasiwai Japa
Michio Kitahara
Kas d. Si grma
Stephan von Stenglin
ec
Wi Kiks Asria
(Bim) Bars
Johann Prader Bim(Austria) Czc Rpbic
har
Kazaksalxmbr
Svak Rpbic
Sviatrk
Jr Krmrs Armia(nras) Bsia a hrzvia
Yuriy G. Yakusha Baria
(Ukraine) CraiaCprs
gria
IsraMacia, rmr
ysav Rpbic
Mva
nrasRmaia
ukrai
Rbr gariri Csa Rica
(Rpúbica Bivariaa e Savar
Vza) gamaaRamón Guzmán hras
(Spain) Mxic
nicaraaSpai
Vza, Rpúbica
Bivariaa
Arri Sa Abaia
(Ia) grcMiranda Xaa Ia
(Greece) Maa
PraSa Mari
timr-ls
Ricar Mrra Asraia
(Asraia) Kiribai
Wilhemina C. Mañalac Kra
(Philippines) Marsa Isas
Micrsia, Fra
Sas Mia
nw Zaa
PaaPapa nw gia
Piippis
SamaScs
Sm Isas
Vaa
ge ha Cia
(Cia)HE Jianxiong
(China)
Jaa Fri Aia a Barba
(Caaa) Baamas, tPeter Charleton Barbas
(Ireland) Biz
Caaa
dmiicagraa
Ira
JamaicaS. Kis a nvis
S. lcia
S. Vic a
grais
tmas Saarim dmark(Fia) esia
Jon Thorvardur Sigurgeirsson Fia
(Iceland) Ica
lavialiaia
nrwa
Sw
Executive Directors and Alternates on April 30, 20071
1 The voting power o each chair can be ound in Appendix IV on the CD-ROM; changes in the Executive Board during FY2007 are listed in Appendix V on the CD-ROM.
(Alternate Executive Directors are indicated in italics.)
Pirr dqs FracBertrand Dumont
tm Scar ui Kim Jens Larsen
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gvrac, raizai, a acs | 5
A. Sakr Saaa Barai(ep) ep
Samir El-Khouri Iraq
(Lebanon) Jra
Kwailba
liba Arab Jamairia
Maivsoma
Qaar
Sria Arab Rpbicui Arab emiras
ym, Rpbic
Abaa S. Aazzaz Sai Arabia
(Sai Arabia)
Ahmed Al Nassar (Saudi Arabia)
hi e Pa Bri darssaam(Maasia) Cambia
Chantavam Sucharitakul Fiji
(Thailand) Isiala Pp’s dmcraic
Rpbic
MaasiaMamar
npa
Siapr
taiata
Viam
Pr gak Aa
(Ka) Bswaa
Samura Kamara Bri(Sierra Leone) erira
eipia
gambia, tKa
ls
MaawiMzambiq
namibia
niriaSirra l
S Arica
SaSwaziatazaia
uaa
Zambia
tmas Msr Azrbaija
(Swizra) Krz Rpbic Andrzej Raczko Pa
(Poland) Srbia
Swizratajikisa
trkmisa
uzbkisa
Aksi V. Mzi Rssia Frai(Rssia Frai)
Andrei Lushin(Russian Federation)
Abbas Mirakr Aaisa, Isamic
(Isamic Rpbic Ira) Rpbic
Mohammed Daïri Aria
(Morocco) gaa
Ira, Isamic Rpbic
MrccPakisa
tisia
Pa nira Baisa, Jr. Brazi
(Brazi) Cmbia
María Ines Agudelo dmiica Rpbic(Colombia) ecar
gaa
haiiPaama
Sriam
triia a tba
Aars Kisr Baas
(Iia) Ba Amal Uthum Herat Iia
(Sri Lanka) Sri laka
Javir Siva-R Aria
(Pr) Bivia
Héctor R. Torres Ci(Argentina) Paraa
Prura
lara W. Raisir Bi
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70
IMF Aa Rpr | 2007
Senior ocers on April 30, 2007
Jaim Caraa, Csr
Sim Js, ecmic Csr
Ara arms
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Msi S. Ka
dircr, Mi eas a Cra Asia dparm
Ap Si
dircr, Wsr hmispr dparm
Fcia a scia srvics arms
Mica g. K
dircr, Fiac dparm
trsa M. tr-Miassia
dircr, Fisca Aairs dparm
lsi J. lipsciz
dircr, IMF Isi
Sa haa
gra Cs a dircr, la dparm
Jaim Caraa
dircr, Mar a Capia Marks dparm
Mark A
dircr, Pic dvpm a Rviw dparm
Sim Js
dircr, Rsarc dparm
Rbr ewars
dircr, Saisics dparm
Irmai a iais
Mas Am
dircr, exra Rais dparm
Akira Arisi
dircr, Ria oc r Asia a Pacic
Sa M. nsi
dircr, ocs i erp
Vaca1
dircr a Spcia Rprsaiv F oc
a ui nais
Sr srvics
liam P. ebri
dircr, hma Rsrcs dparm
Saira J. Ajaria
Scrar, Scrar’s dparm
Frak hariscr
dircr, tc a gra Srvics dparm
Jaa Pamr
Ci Irmai ocr, tc a gra
Srvics dparm
ofcs
Barr h. Pr2
dircr, oc B a Pai
Br Kpps
dircr, oc Ira Ai a Ispci
Vaca
dircr, oc tcica Assisac Maam
tmas Brs
dircr, Ip evaai oc
1 Barry H. Potter assumed the position o Director and Special Representative to the Fund Oce at the United Nations eective August 13, 2007.
2 Siddharth Tiwari succeeded Barry H. Potter as Director o the Oce o Budget and Planning eective August 15, 2007.
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gvrac, raizai, a acs | 5
IMF organization chart as o April 30, 2007
1 Known ormally as the Joint Ministerial Committee o the Boards o Governors o the Bank and the Fund on the Transer o Real Resources toDeveloping Countries.
2 Attached to the Oce o the Managing Director.
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InFoRMAtIonAnd lIAISon
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IMF Aa Rpr | 2007
Acronyms and abbreviations
Cristis Annual Report was prpar b eiria a Pbicais divisi IMF’s exra Rais dparm. t maiir was Asimia Camiis; cmpsii Appixs was b Aicia ecbar-Bri; trsa evaris d Rsariprvi assisac wi prparai.
72
AFRItAC Arica Ria tcica Assisac Cr
AMl/CFt Ai–m ari/cmbai aci rrrism
APeC Asia-Pacic ecmic Cprai
ASeAn Assciai Sas Asia nais
BIS Bak r Iraia Sms
CCe Cria Cmpiai exrcis
CCl Ci Cri lis
CeMAC Cra Arica ecmic a Mar Cmmi
CFF Cmpsar Fiaci Facii
CgeR Csaiv grp exca Ra Isss
dFId u.K. dparm r Iraia dvpm
dQAF daa Qai Assssm Framwrk
dSBB dissmiai Saars Bi Bar
dSF db ssaiabii ramwrk
eCCu easr Caribba Crrc ui
eCu erpa Crrc ui
eFF ex F FaciieMBI JPMra emri Marks B Ix
endA emrc nara disasr Assisac
ePA ex ps assssm
ePCA emrc Ps-Cfic Assisac
eSAF eac Srcra Ajsm Facii
eSF exs Scks Facii
eu erpa ui
eXR exra Rais dparm
FAd Fisca Aairs dparm
FAtF Fiacia Aci task Frc
FCC Frwar cmmim capaci
FSAP Fiacia Scr Assssm Prram
FSF Fiacia Sabii Frm
FSI Fiacia sss iicar
FSRB FAtF-s ria bFSSA Fiacia Ssm Sabii Assssm
Fy Fiacia ar
gddS gra daa dissmiai Ssm
gdP grss msic prc
gFSR gba Fiacia Sabii Rpr
gMR gba Miri Rpr
gRA gra Rsrcs Acc
hIPC havi Ib Pr Cris
IA Ivsm Acc
IdA Iraia dvpm Assciai(Wr Bak grp)
Ieo Ip evaai oc
IF Ira Framwrk r tra-Ratcica Assisac
IFRS Iraia Fiacia Rpri Saars
IFS Iraia Fiacia Saisics
IMFC Iraia Mar a Fiacia Cmmi
MCM Mar a Capia Marks dparm
Mdg Miim dvpm ga
MdRI Miara db Ri Iiiaiv
MtS Mim-trm Sra
oAP Ria oc r Asia a Pacic
oeCd oraizai r ecmic Cpraia dvpm
oFC osr acia cr
oIA oc Ira Ai a Ispci
otM oc tcica Assisac Maam
PdR Pic dvpm a Rviw dparm
PIn Pbic Irmai nicPRgF Pvr Rci a grw Facii
PRSP Pvr Rci Sra Papr
PSI Pic Sppr Isrm
PSIA Pvr a Scia Impac Aasis
QedS Qarr exra db Saisics
Reo Ria ecmic ok
RoSC Rpr obsrvac Saarsa Cs
RtAC Ria tcica Assisac Cr
RtC Ria traii Cr
SAF Srcra Ajsm Facii
SBA Sa-B Arram
SCA-1 Firs Spcia Ci Acc
SdA Spcia disbrsm Acc
SddS Spcia daa dissmiai SaarSdMX Saisica daa a Maaa exca
SdR Spcia rawi ri
SRF Sppma Rsrv Facii
StA Saisics dparm
S&P Saar a Pr’s
tIM tra Irai Mcaism
un ui nais
WAeMu Ws Arica ecmic a Mar ui
Weo Wr ecmic ok
Wto Wr tra oraizai
phgrah
Sp Ja/IMF sa p adaacra, Bra Rickrb/g Imas cvr
escCci, Cris Sabrr/g Imas cvr 2
Mica Spir/IMF sa p pa 5
Sp Ja/IMF sa ps pas 6, 31, 45, 57, a 60
Pa har/Crbis pa 7
uric Prr/nwscm pa 11
Mar Wis/ IMF sa p pa 15
A Rai/pa/Crbis pa 17
Ai gri/AgP/Crbis pa 21
Sbasia Mrira/pa/Crbis pa 25
Prcai Kiiwsak/AFP/g Imas pa 27
ReuteRS/nzim Kaa pa 41
Ramzi haiar/g Imas pa 43
gr nw r IMF pa 47
e Saazar/IMF sa p pa 51
Csrci Prap/Crbis pa 53
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Cd-RoM isrcis
Isr Cd-RoM i Cd riv r cmpr. A cs pa wi appar wii r brwsr wiw.PdF s ar ic Cd-RoM a ca b p si Ab Rar.t wa a r cp Ab Rar prram, pas visi www.adobe.com.
t Cd-RoM cais IMF 2007 Annual Report caprs i r aas: eis, Frc, a Spais.A appixs, ici acia sams, ar as Cd, i eis. I aii, Cd
cais Pbic Irmai nics, prss rass, assr rprs, a abs a bxs ri mr ai aciviis scrib i Annual Report caprs.
Fr mr irmai, visi IMF’s Wb si a www.im.org.
©
I n t e r n a t i o n a l M o n e t a r y F u n 2 0 0 7
d e s i g n : F i n
a n c i a l C o m m u n i c a t i o n s , I n c .
B e t h e s a ,
M d
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I n t e R n A t I o n A l M o n e t A R y F u n d , 7 0 0 1 9 t h S t R e e t , n . W . , W A S h I n g t o n , d . C . 2 0 4 3 1 u . S . A .