Annual Report cover 2004
Annual Report of the Executive Board

Annual Report of the Executive Board for the Financial Year Ended April 30, 2004

September 2004



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Ordering Information


File 1
322k pdf file
Message from the Managing Director
Executive Board
  Senior Officers
  Letter of Transmittal

File 2
pdf file
1.   IMF Surveillance--Promoting Growth and Stability
  Country Surveillance
  Global Surveillance
World Economic Outlook • Global Financial Stability Report
    Regional Surveillance
Euro Area • Euro in Central Europe • CAEMC
    Structural Reforms and Growth
2.   Strengthening the International Financial System
    Enhancing the Framework and Content of Surveillance
    Strengthening Analytical Tools
Debt Sustainability Assessments • Balance Sheet Approach • Public Investment and Fiscal Policy
    Systemic Issues
    Financial Sector Stability
Financial Sector Assessment Program • Financial Soundness Indicators • Offshore Financial Center Assessments • Anti-Money-Laundering and Combating the Financing of Terrorism
    Data Provision to the IMF and the Public
Data Standards Initiatives • Legal Framework • Data Provision for Surveillance Purposes
    Crisis Resolution
Collective Action Clauses • Related Issues
3.   Improving IMF Lending Policies and Practices
    Financing Facilities and Policies
Review of Contingent Credit Lines • Exceptional Access Policy • Compensatory Financing Facility Review • Trade-Related Adjustments
    Program Design and Conditionality
Crisis in Argentina • IEO Reports • Bank-Fund Collaboration
4.   The Fight Against Poverty in Low-Income Countries
    PRSP Approach to Development Assistance
    Role of the IMF in the Medium Term
    HIPC Initiative
    Debt Sustainability for Low-Income Countries
    Millennium Development Goals
    Doha Round and Other Trade-Related Issues
File 3
pdf file
5.   Technical Assistance and Training
  External Financing
  Technical Assistance Delivery in FY2004
    Evaluation of Technical Assistance
    Board Review of Technical Assistance
    IMF Institute
6.   Governance, Cooperation, and Transparency
    IMF Governance
    Members' Representation and Voice in the Institution
    Transparency of the IMF and Its Members
7.   Financial Operations and Policies
    Regular Financing Activities
Lending • Resources and Liquidity
    Concessional Financing Activities
Poverty Reduction and Growth Facility • Enhanced HIPC Initiative • Financing of PRGF Subsidies and the HIPC Initiative • Investment of PRGF, PRGF-HIPC, and SDA Resources • Post-Conflict Emergency Assistance
    Income, Charges, Remuneration, and Burden Sharing
    Financial Risk Management and Precautionary Balances
    Quota Developments
    SDR Developments
    Safeguards Assessments
    Arrears to the IMF
  8.   Budget, Human Resources, and Organization
    Administrative and Capital Budgets
    Human Resources

File 4
pdf file
I   International Reserves
II   Financial Operations and Transactions
  III   Principal Policy Decisions of the Executive Board
  IV   Relations with Other International Organizations
  V   External Communications
  VI   Press Communiqués of the International Monetary and Financial Committee and the Development Committee
  VII   Executive Directors and Voting Power on April 30, 2004
  VIII   Changes in Membership of the Executive Board
File 5
pdf file
IX   Financial Statements, April 30, 2004
Acronyms and Abbreviations

The IMF's work in FY2004 took place during a welcome recovery in the world economy after the slowdown of 2001–02. Global GDP growth in 2003 almost reached its long-term trend rate of 4 percent, while inflation remained subdued. World trade growth also picked up, and net private capital flows to emerging market and developing countries increased, as emerging market bond spreads narrowed.

The strengthening global recovery was led by the United States and a number of Asian economies, including China. Continuing low interest rates in the advanced economies, in an environment of more credible monetary policies and expansionary fiscal policies in several countries, contributed to the improvement in global growth. The strong performance of a number of emerging market economies reflected measures taken in recent years to improve their flexibility and resilience.

During FY2004, the IMF continued to work with its member countries to foster sustained growth and financial stability—and reduce poverty in its low-income members—through its surveillance activities and policy advice; lending in support of stabilization and reform programs; and technical assistance in formulating sound policies and building robust institutions.


As in previous years, a major part of the IMF's activities during the financial year were directly related to its responsibility for overseeing the international monetary system and the economic, financial, and exchange rate policies of member countries.

The Executive Board conducted its twice-yearly comprehensive assessments of the world economic outlook and global financial stability in August 2003 and March 2004. By March, the global economic recovery had strengthened and broadened, and Directors agreed that the focus of policy efforts should be on medium-term measures that would underpin the sustainability of growth while rebuilding room for maneuver to respond to possible future shocks. They observed that managing the transition to a higher interest rate environment would be a key challenge. Directors also agreed that the relatively benign conditions in mature and emerging financial markets provided a window of opportunity to focus policy attention on structural reforms.

The Fund completed Article IV (country) consultations with 115 members. It continued to emphasize financial sector surveillance. Under the IMF-World Bank Financial Sector Assessment Program (FSAP), introduced in 1999, over 100 countries have either undertaken an FSAP exercise or formally committed to do so; 58 assessments have been completed. During the 2003 FSAP exercises in both Germany and Japan, the Fund contributed to domestic debates on financial sector reform. Significant reforms related to FSAP exercises are under way in several developing countries, including Tanzania and Tunisia. In addition, as of end-April 524 Reports on the Observance of Standards and Codes (ROSCs) had been completed for 106 economies across 12 areas of interest.

Crisis Prevention and Resolution

During the financial year, the IMF's Board and staff took further steps to make Fund surveillance more effective.

The Fund sharpened its analytical tools—for example, debt sustainability assessments and balance sheet analysis—and completed draft guidelines on financial soundness indicators.

After the completion in October 2003 of the 12-month pilot program of the Fund and the World Bank for assessing anti-money-laundering/combating the financing of terrorism (AML/CFT) regimes, the Board decided that this work should be included in all Financial Sector Assessment Program reports and Offshore Financial Center (OFC) assessments. The Board endorsed the 40 + 8 Recommendations of the Financial Action Task Force as the new, expanded standard for AML/CFT assessments.

The Board also reviewed the OFC assessment program. To date, 41 of the 44 jurisdictions contacted by the IMF have undergone initial assessments.

Given the importance of good data for surveillance, during FY2004 the Board expanded, effective January 2005, the categories of data that members are obliged to provide to the Fund under Article VIII, Section 5, and set out a procedural framework for enforcing this obligation.

Besides working on crisis prevention tools, the IMF sought ways to ensure the more orderly resolution of crises that do occur. With the Fund's encouragement, the number of emerging market countries that are including collective action clauses (CACs) in their international sovereign bonds issued under New York law, where CACs have not been the market standard, has grown (to 18 as of end-April 2004). Sovereign bonds containing CACs accounted for more than 70 percent of the total volume of sovereign bonds issued during the second half of 2003 and early 2004.

Lending Policies and Facilities

To better meet the evolving needs of its members, the IMF made a number of changes to its lending policies and facilities during the year and reviewed the design of several programs and the policy conditions that borrowing countries are expected to meet.

The Fund's Contingent Credit Lines—an instrument introduced in 1999 to provide a precautionary line of defense for countries vulnerable to contagion despite sound fundamentals—expired, unused, on November 30, 2003. Subsequently, the IMF began exploring the scope for adapting precautionary arrangements as an instrument for crisis prevention.

The IMF reviewed the policy framework relating to financing in amounts that exceed normal limits ("exceptional access").

Based on the recommendations of the Independent Evaluation Office, the Fund introduced ex post assessments of IMF-supported programs.

The Fund's Independent Evaluation Office issued two reports—one on the role of the Fund in capital account crises in Brazil, Indonesia, and Korea, and another on fiscal adjustment in IMF-supported programs. The latter report found that some common criticisms—notably, that IMF-supported programs adopted a "one-size-fits-all" approach, were inflexible, and caused a decline in social spending—were not supported by the evidence.

Support for Low-Income Countries

The main objective of the IMF's work with low-income countries is deep and lasting poverty reduction, as elaborated in the UN's Millennium Development Goals (MDGs). Working closely with the World Bank, and in the context of the policy frameworks set out in countries' Poverty Reduction Strategy Papers, the IMF provides its low-income members with policy advice, technical assistance, and concessional loans under the Poverty Reduction and Growth Facility (PRGF), and makes grants under the Heavily Indebted Poor Countries (HIPC) Initiative.

During the financial year, 36 countries received disbursements totaling SDR 865 million ($1.3 billion) under their PRGF arrangements. Ten new PRGF arrangements, with IMF loan commitments totaling SDR 955 million ($1.4 billion), were approved. As of April 30, 2004, 36 member countries' adjustment and reform programs were being supported by PRGF arrangements with total commitments of SDR 4.4 billion ($6.4 billion).

As of April 30, 2004, the Fund had committed SDR 1.8 billion ($2.6 billion) in grants and disbursed SDR 1.2 billion ($1.7 billion) in HIPC assistance. By end-April, 27 countries had reached their decision points under the enhanced HIPC Initiative, and Ethiopia, Guyana, Nicaragua, Niger, and Senegal had reached their completion points, bringing the total to 13 countries.

The IMF and World Bank collaborated on the first Global Monitoring Report on Policies and Actions for Achieving the MDGs and Related Outcomes, which was discussed by the joint IMF/World Bank Development Committee in April 2004.

In March 2004, the IMF's Executive Board discussed the benefits of subsidizing the rate of charge for emergency assistance to PRGF-eligible countries hit by natural disasters and asked staff to prepare specific proposals for implementation.

Given concerns that many low-income countries will be unable to achieve the MDGs without increased external assistance, the staffs of the IMF and the World Bank have proposed a debt sustainability framework to guide both the borrowing decisions of these countries and the lending and grant-allocation decisions of official creditors and donors.

To enhance aid predictability and effectiveness, the Fund is working on donor harmonization with the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD) and the multilateral development banks.


A few months after the Doha Round trade talks stalled in Cancún in September 2003, the Fund's Managing Director and the World Bank's President sent a joint letter to heads of state and government as well as finance and trade ministers stressing the importance of the successful completion of the round, and, in particular, the importance of liberalizing agricultural trade and the need for greater flexibility in applying trade regulations with which poor countries may be unable to comply.

In April 2004, the IMF's Board approved a new financing policy, the Trade Integration Mechanism, under which the Fund will help countries suffering temporary balance of payments shortfalls arising from trade liberalization by other countries.

The Fund also provided technical assistance to a number of countries in customs and tax and tariff reform; collaborated with other agencies and donors in the Integrated Framework for Trade-Related Technical Assistance to help incorporate trade reforms in national poverty reduction strategies; identified potential risks and helped authorities understand the benefits of international integration; and studied the impact of trade reforms on member countries.

Technical Assistance and Training

The IMF provides technical assistance to member countries and training for their officials, both at its Washington, D.C., headquarters and at regional centers.

The amount of technical assistance provided by the Fund increased in FY2004 to 367 person-years, from 356 in FY2003. Sub-Saharan Africa continued to be the largest recipient region, but technical assistance increased in the Asia-Pacific region, in part because of the assistance provided to post-conflict countries such as Cambodia and Timor-Leste, and increased assistance to China, Indonesia, and Mongolia. A number of countries in central and eastern Europe received technical assistance related to their preparation for joining the European Union on May 1, 2004.

In May 2003, the Fund opened its second regional technical assistance center in Africa. West AFRITAC, which is located in Bamako, Mali, will serve Benin, Burkina Faso, Côte d'Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, and Togo.

External financing accounted for 29 percent of total assistance delivered by the IMF in FY2004.

Governance, Cooperation, and Transparency

At the IMF-World Bank April 2004 meetings, the Communiqué of the International Monetary and Financial Committee (IMFC) called for continued efforts to enhance the capacity of developing countries to participate more effectively in IMF decision making, and called for the Board to continue working on quotas, voice, and representation. The Development Committee circulated a proposed road map on procedures and next steps.

The Board also reviewed the Fund's transparency policy. Publication of Article IV country reports increased in FY2004—nearly three-fourths of the Fund's member countries agreed to publish at least one country report, and nearly all documents summarizing countries' policy intentions were published. To further enhance transparency, the Board established a policy of presumed but still voluntary publication for all reports on the use of Fund resources and post-program monitoring, as well as Article IV reports.

Financial Operations

The improvement in global economic conditions and increased resilience of many emerging market economies were reflected in reduced demand for IMF lending.

New commitments under the Fund's regular loan facilities dropped from SDR 29.4 billion ($42.7 billion) in FY2003 to SDR 14.5 billion ($21.1 billion) in FY2004. Together, Argentina and Brazil accounted for more than 90 percent of total new commitments. The Fund also approved or augmented Stand-By Arrangements with the Dominican Republic, Guatemala, Paraguay, and Ukraine, and Burundi received SDR 9.6 million ($13.9 million) in post-conflict emergency assistance. (For lending to low-income countries, see above.)

The Fund's outstanding credit reached an all-time high of SDR 70 billion ($101.6 billion) in September 2003 but declined to SDR 62.2 billion ($90.3 billion) by the end of the financial year, SDR 3.5 billion ($5.1 billion) less than a year earlier, mostly owing to large net repayments by Brazil, and to a lesser extent, Russia and Turkey.

The IMF's one-year forward commitment capacity—the quota-based resources available for new lending over the next 12 months, which provides the main measure of the IMF's liquidity or lending capacity—had declined to SDR 58 billion ($84 billion) at end-April 2004 from SDR 61 billion ($89 billion) a year earlier, primarily because of the Fund's large commitments to Argentina and Brazil.

Human Resources, Organization, and Administration

Several senior personnel changes took place. Managing Director Horst Köhler resigned in March 2004 to accept the nomination for the Presidency of Germany, to which he was elected in May. He was succeeded in June 2004 by Rodrigo de Rato, who served as Spain's Minister of Economy and Vice President for Economic Affairs during 2000-04. Deputy Managing Director Eduardo Aninat left the Fund in June 2003, and Deputy Managing Director Shigemitsu Sugisaki retired in January 2004. Mr. Aninat was succeeded by Agustín Carstens, former Deputy Secretary of Finance in Mexico, and Mr. Sugisaki by Takatoshi Kato, who has held important posts in government, business, and academia in Japan. Raghuram G. Rajan, Professor of Finance at the University of Chicago, succeeded Kenneth Rogoff as the Fund's Economic Counsellor and Director of the Research Department in October 2003.

There were also some departmental changes. The European II Department, formed in 1992 to work with the 15 countries of the former Soviet Union, was dissolved and responsibility for these countries was transferred partly to the European Department and partly to the Middle East and Central Asia Department. The African Department was reorganized to increase its effectiveness.

The IMF's net administrative expenses in FY2004 were $747.6 million, a 3.8 percent increase over last year's expenditure outturn, the lowest such increase since FY1997. Expenditures were well under budget. Efficiency gains, lower-than-projected personnel and travel costs, and higher-than-forecast reimbursements contributed to the underrun in net expenditures; in addition, contingencies were not utilized. The Fund continued to modernize its internal budget procedures.

Regular and Concessional Lending (Disbursement)
(In billions of SDRs, financial year)
Chart 1
IMF Credit Outstanding1
(In billions of SDRs, end of financial year)
Chart 2
1Excludes concessional lending.
PRGF—New Commitments1
(In millions of SDRs, financial year)
Chart 3
1Includes augmentations less approved reduction.
HIPCs—Debt Reduction1
(In billions of U.S. dollars, in 2003
net-present-value terms)
Chart 4
1For the 27 countries that had reached their decision points as of April 30, 2004.