Policy Papers
2010
April 19, 2010
Provisional Agenda for the Twenty-First Meeting of the International Monetary and Financial Committee
Description: The following is the provisional agenda for the Twenty-First Meeting of the International Monetary and Financial Committee, which is to be convened at the Fund’s Headquarters in Washington, D.C. on Saturday, April 24, 2010. A joint working dinner of IMFC members and G-20 ministers will be held on Friday, April 23 at 7:30 p.m. in HQ1–Meeting Halls A & B. The IMFC meeting will be followed by the press conference of the IMFC Chairman and the Managing Director at 2:30 p.m.
April 16, 2010
Cross-Cutting Themes in Economies with Large Banking Systems
Description:
This paper examines cross-country perspectives on economies with large banking systems relative to GDP. As such economies tend to have domestic institutions with major foreign currency cross-border activities, strong links are generated between the health of the financial system and sovereign sustainability. These links are of central interest to the paper. It does not cover off-shore centers as their international links tend to be relatively unrelated to domestic activities.
To make the analysis more concrete, the experience of five economies—Hong Kong SAR, Iceland, Ireland, Singapore, and Switzerland—are featured (plus a Box on the Benelux region). These economies had large and relatively diversified international banking sectors compared to their fiscal capacity before the global financial crisis of 2007–09, and divergent experiences over the crisis. The paper analyzes the reasons for these outcomes. (A range of private and public sector individuals were interviewed during missions to Belgium, Hong Kong SAR, Ireland, Singapore, Switzerland, and the United Kingdom.)
April 15, 2010
Establishment of an Administered Account for Interim Holdings of Voluntary Contributions for Fund Activities and Establishment of a Framework Administered Account for Selected Fund Activities - Subaccount for the Administration of Selected Smaller-Scale Capacity Building Activities
Description: This paper proposes that the Fund establish an administered account and a subaccount under the Framework Instrument for Selected Fund Activities (the “SFA”), to enhance the new external financing architecture for capacity building and related Fund activities. The specific accounts proposed to be established are: (1) an administered account for interim holdings of voluntary contributions for Fund activities, that would primarily accommodate contributions from donors for Fund activities that are planned but not yet fully developed (“The Interim Holding Administered Account,” hereinafter, the “Holding Account”); and (2) a Subaccount for the administration of selected smaller-scale capacity building and related activities (the “Catch-All Subaccount”) under the SFA Instrument, which would facilitate the administration of external funds for smaller, one-off projects.
April 14, 2010
Review of the Fund’s Income Position for FY 2010 and FY 2011
Description:
This paper reviews the Fund’s income position for FY 2010 and FY 2011. The paper updates projections provided at the FY 2010 midyear review and sets out related proposed decisions for the current and next financial years.
The paper is structured as follows: Section II reviews the FY 2010 income position and the main changes from the midyear projections; Section III makes proposals on the disposition of FY 2010 net income, which includes the General Resources Account (GRA) net operational income and profits from the limited gold sales; Section IV discusses the FY 2011 income outlook, the margin on the rate of charge, and projected burden sharing adjustments; and Section V reviews special charges.
April 13, 2010
The Fund’s Liquidity Position—Review and Outlook
Description: This paper reviews the Fund’s liquidity position. The review covers the Fund’s financial activities for the period September 11, 2009 through March 31, 2010, and also discusses recent developments likely to influence the Fund’s liquidity position. Against this backdrop, it examines the outlook for liquidity using the one-year Forward Commitment Capacity (FCC), the primary measure of the Fund’s liquidity, which is calculated taking into account supplementary resources made available under borrowing arrangements, including note purchase agreements.
April 13, 2010
Reserve Accumulation and International Monetary Stability - Supplementary Information
Description:
The modern history of the international monetary system (IMS) starts with the shift from a bimetallic system to the Gold Standard in the 1870s and 1880s. Under the Gold Standard, the major national currencies were freely convertible to gold at a fixed exchange rate, with adjustment largely undertaken through flexible prices, wages and income. This system survived up to the outbreak of the First World War, and while it was subsequently re-established in a modified form following a painful period of post-war disinflation, the economic and political strains of the Great Depression led to the system’s ultimate collapse in the 1930s.
Negotiations between the U.K. and U.S. in the 1940s led to the post war emergence of the Bretton Woods system of fixed and adjustable exchange rates tied to the dollar, with the dollar fixed to gold and the IMF established to oversee the system. However, this system too faced repeated strains, and with the dollar’s link to gold broken and most major currencies floating in the early 1970s, the current arrangements centered on floating currencies were born. The U.S. dollar remained the key reserve currency in the new system, with U.S. Treasury Bills the major reserve asset.
April 13, 2010
Reserve Accumulation and International Monetary Stability
Description: The last comprehensive discussion of reform of the international monetary system (IMS)—the set of official arrangements that regulate key dimensions of balance of payments—international reserves, exchange rates, current payments, and capital flows—was held nearly four decades ago. In light of repeated and costly international financial crises since then, it is timely to review the structure of the IMS to assess how it can be strengthened and made more resilient. At issue is the confluence of, on one side, an unprecedented build-up in global current account imbalances and volatile cross border capital flows, accompanied by a sharp build-up of international reserves, and on the other side, the concentration of those reserves in a few reserve currencies facing new challenges in maintaining fiscal and financial stability. As pre-crisis trends appear set to resume, this tension calls for examining their broader implications for the stability and efficiency of the current system. While the paper views the problems of the IMS through this prism in the tension between high reserve demand and narrow reserve supply, it also inevitably touches on all the components of the IMS—exchange rate arrangements, capital flows, and the global adjustment process. It should also be seen in the broader context of the Fund’s recent work on IMS stability, which started with a paper focused on exchange rate arrangements last summer and will continue in coming months with another on capital flows.
April 1, 2010
Preserving Debt Sustainability in Low-Income Countries in the Wake of the Global Crisis
Description: The global financial crisis has had a significant impact on low-income countries (LICs)’ debt vulnerabilities. Recent debt sustainability analyses (DSAs) indicate that external and fiscal financing requirements have increased. In addition, standard measures of a country’s capacity to repay debt―GDP, exports, and fiscal revenue―are expected to be permanently lower. On average, debt ratios are therefore expected to deteriorate in the near term, particularly for public debt.
March 29, 2010
The FY2011–FY2013 Medium-Term Budget
Description:
The FY 11–13 medium-term budget (MTB) presented in this paper brings to a close the three-year restructuring effort that began with the FY 09–11 MTB. It secures savings of $100 million in real terms while providing sufficient financing for structural operations and the Fund’s response to the global financial crisis.
This budget has been crafted in a period of uncertainty regarding the final scope and duration of the financial crisis as well as the ongoing responsibilities that the Fund may retain even as the crisis unwinds. There is also uncertainty about new responsibilities that may result as a review of the Fund’s mandate is undertaken. Addressing these items will be part of the work agenda to be undertaken in the coming year.
March 29, 2010
Modernizing the Surveillance Mandate and Modalities
Description: This paper is one in a series of follow-up papers on The Fund’s Mandate—An Overview and The Fund’s Mandate—The Legal Framework discussed by the Executive Board on February 22, 2010. This paper proposes ideas to modernize the mandate and modalities of surveillance. It addresses how the Fund might increase the value of its surveillance by considering both the substance of surveillance (what it should do) and its modalities (how to do it). The main ideas focus on how the Fund can do more—and more sharply defined—multilateral surveillance, generate greater value and traction from bilateral surveillance, and integrate the two better. Options to buttress multilateral surveillance include doing more analysis of outward spillovers, holding multilateral consultations as needed on special topics to foster collaboration and collective action, and strengthening financial sector surveillance by mapping interconnectedness across borders and sectors and the transmission channels of macro-financial instability. The adoption of Multilateral Surveillance Decision could help support these ideas. Options to increase the value and traction of bilateral surveillance include promoting better cross-country understanding, with more thematic multi-country reports, producing more timely and topical reports, and increasing outreach and engagement with stakeholders.