Policy Papers
2009
June 26, 2009
A New Architecture of Facilities for Low-Income Countries
Description:
This paper proposes a new facilities architecture for Low-Income Countries. It is based on "Option 2" set out in the framework paper discussed by the Executive Board on March 20, 2009. The new architecture provides a unified facilities framework for LICs under a new Poverty Reduction and Growth Trust (PRGT). The facilities are distinguished primarily by the duration of the financing and adjustment needs and the conditionality standard.
Supplement
Decision
June 22, 2009
The 2007 Surveillance Decision - Revised Operational Guidance
Description: The adoption of the 2007 Decision on Bilateral Surveillance was a landmark for the Fund. Unlike its predecessor, which was focused exclusively on exchange rate policies, the Decision mapped out the full scope of surveillance, including domestic policies. It set out external stability as the organizing principle for surveillance, and was thus expected to promote focus on issues central to the Fund’s mandate, including monetary, fiscal, and financial sector policies and increased attention to exchange rate issues. Surveillance under the Decision was intended to promote candor through clear assessments of the economic situation, outlook, and vulnerabilities of members and clear policy recommendations in pursuit of domestic and external stability.
June 17, 2009
A Framework for the Fund's Issuance of Notes to the Official Sector
Description: On July 1, 2009, the Executive Board of the International Monetary Fund discussed the Managing Director's proposal for a framework for issuing notes to the official sector. The framework approved by the Executive Board was adapted on the basis of these discussions, as reflected in supplement 2 of the paper. It enables members to invest in IMF paper under note purchase agreements approved by the Board, without any pre-specified limit on the cumulative amount committed under note purchase agreements. The actual issuance of notes will occur should the IMF need additional resources at the time of a loan disbursement to a member. The notes would have similar financial terms to the IMF’s recent bilateral borrowing agreements.
June 17, 2009
Borrowing by the Fund - Operational Issues
Description: An increase in the Fund’s resources available to assist its members represents an important part of the multilateral response to the global crisis. To this end, the IMFC agreed in April that there should be an increase in the resources available to the Fund through immediate financing from members of $250 billion, subsequently incorporated into an expanded and more flexible New Arrangements to Borrow (NAB), increased by up to $500 billion. Recognizing that IMF is, and shall remain, a quota-based institution, the IMFC also called for the completion of the Fourteenth General Review of Quotas by January 2011. This is consistent with borrowing being a temporary arrangement to supplement Fund resources to address the current crisis.
June 12, 2009
Debt Bias and Other Distortions: Crisis-Related Issues in Tax Policy
Description:
Tax distortions are likely to have encouraged excessive leveraging and other financial market problems evident in the crisis. These effects have been little explored, but are potentially macro-relevant. Taxation can result, for example, in a net subsidy to borrowing of hundreds of basis points, raising debt-equity ratios and vulnerabilities from capital inflows.
This paper reviews key channels by which tax distortions can significantly affect financial markets, drawing implications for tax design once the crisis has passed.
June 10, 2009
Borrowing Agreement with the Government of Canada
Description: This paper presents for the approval of the Executive Board a draft borrowing agreement between the Government of Canada and the Fund. The Government of Canada announced its willingness to lend up to $10 billion to the Fund to support the Fund’s ability to provide timely and effective balance of payments assistance to its members in the context of the summit of the Leaders of the Group of Twenty (G-20) in early April. Staff and the Canadian authorities have now reached agreement on a draft borrowing agreement, the text of which is set forth in the Attachment (the “Agreement”). The Agreement would make an important contribution to the multilateral effort to ensure the adequacy of the Fund’s financial resources, adding to the resources already available to the Fund from the borrowing agreements with Japan and Norges Bank that were approved by the Board recently. It is also expected that borrowing agreements with other members will be proposed for Board approval soon.
June 9, 2009
Proposal for a General Allocation of SDRs
Description: Faced with a global crisis of exceptional magnitude, the membership of the IMF has called for ambitious steps to strengthen the global financial safety net. These include, alongside efforts to strengthen the Fund’s lending capacity, an allocation of SDRs equivalent to US$250 billion to become effective well before the 2009 Annual Meetings. This call recognized that an SDR allocation is a prime example of cooperative monetary response to a global predicament. As such it would build confidence by adding to other concrete evidence of the international community’s commitment to a collaborative response to the crisis. This paper follows up on the IMFC’s request, in its Spring 2009 communiqué, for the IMF to put forward a concrete proposal assessing the case for such a US$250 billion allocation and describing how it could be implemented.
June 4, 2009
Review of the Experience with the Policy Support Instrument
Description: This review is focused mainly on the implementation of the Policy Support Instrument (PSI) against the goals and expectations set out by the Executive Board. Some possible modifications to the PSI that have been considered by various stakeholders are also touched upon in the concluding section. This review was conducted in parallel with ongoing work on a new architecture of lending facilities for low-income countries (LIC). Based on the results of this review, the reform of LIC facilities is not expected to alter the case for the PSI as a complement to financing instruments.
June 3, 2009
Statement by the Managing Director on the Work Program of the Executive Board - Executive Board Meeting - June 3, 2009
Description: Against the backdrop of a global economic crisis, the IMFC has underscored the Fund’s central role in responding to its membership’s needs and restoring prosperity and financial stability. The Fund has acted with alacrity—by overhauling its lending framework; mobilizing strong support and firm pledges toward a tripling of its resources; and continuing to strengthen the quality of its surveillance. The work program is heavy, reflecting the responsibilities assigned to the Fund by the international community and the needs of our membership.
June 1, 2009
Evaluation of Technical Assistance on Bank Supervision by Long-Term Experts in Asia
Description: Technical Assistance Delivery by Long-Term Experts are an increasingly important vehicle for delivering TA in all financial sector areas. In recent years, the amount of MCM TA provided through LTEs has been about 28 staff years annually, or 36 percent of MCM’s total TA field delivery (including RTACs). This share has recently risen as a result of the steady increase in external financing and the cutback in MCM’s own resources for capacity building in the context of the recent downsizing. Indeed, the share of LTEs (who are mostly externally financed) in total planned MCM TA jumped to 41 percent in fiscal year 2009 (May-April). As these factors are expected to persist, the importance of LTEs as a means of delivering TA will likely increase further.